Tom Werner has been the CEO of Lamb Weston Holdings, Inc. (NYSE:LW) since 2016, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Lamb Weston Holdings

Comparing Lamb Weston Holdings, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Lamb Weston Holdings, Inc. has a market capitalization of US$11b, and reported total annual CEO compensation of US$6.7m for the year to May 2020. This means that the compensation hasn't changed much from last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.0m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$13m. Accordingly, Lamb Weston Holdings pays its CEO under the industry median. Furthermore, Tom Werner directly owns US$23m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 24% of total compensation represents salary, while the remainder of 76% is other remuneration. Lamb Weston Holdings pays a modest slice of remuneration through salary, as compared to the broader 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 Lamb Weston Holdings, Inc.'s Growth Numbers

Over the past three years, Lamb Weston Holdings, Inc. has seen its earnings per share (EPS) grow by 1.1% per year. It saw its revenue drop 4.2% over the last year.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Lamb Weston Holdings, Inc. Been A Good Investment?

Boasting a total shareholder return of 40% over three years, Lamb Weston Holdings, Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

As we noted earlier, Lamb Weston Holdings pays its CEO lower than the norm for similar-sized companies belonging to the same industry. In contrast, shareholder returns have been excellent over the past three years, and that’s certainly a promising trend to keep an eye on. As a result of the juicy return to investors, CEO compensation may well be quite reasonable.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Lamb Weston Holdings that investors should be aware of in a dynamic business environment.

Important note: Lamb Weston Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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