This article will reflect on the compensation paid to John Derham Cato who has served as CEO of The Cato Corporation (NYSE:CATO) since 1999. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Cato.

See our latest analysis for Cato

Comparing The Cato Corporation's CEO Compensation With the industry

According to our data, The Cato Corporation has a market capitalization of US$229m, and paid its CEO total annual compensation worth US$5.3m over the year to February 2020. We note that's an increase of 23% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.3m.

In comparison with other companies in the industry with market capitalizations ranging from US$100m to US$400m, the reported median CEO total compensation was US$1.2m. Accordingly, our analysis reveals that The Cato Corporation pays John Derham Cato north of the industry median. What's more, John Derham Cato holds US$28m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 20% of total compensation out of all the companies we analyzed, while other remuneration made up 80% of the pie. Cato is paying a higher share of its remuneration through a salary in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at The Cato Corporation's Growth Numbers

Over the last three years, The Cato Corporation has shrunk its earnings per share by 47% per year. Its revenue is down 26% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has The Cato Corporation Been A Good Investment?

The Cato Corporation has generated a total shareholder return of 0.7% over three years, so most shareholders wouldn't be too disappointed. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

As previously discussed, John is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. This doesn't look great when you realize that the company has been suffering from negative EPS growth for the last three years. While shareholder returns are acceptable, they don't delight. So you can understand why we do not think CEO compensation is particularly modest!

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 2 warning signs (and 1 which can't be ignored) in Cato we think you should know about.

Switching gears from Cato, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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