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Shareholders may be wondering what CEO Alan Trefler plans to do to improve the less than great performance at Pegasystems Inc. (NASDAQ:PEGA) recently. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 22 June 2021. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We think CEO compensation looks appropriate given the data we have put together.
How Does Total Compensation For Alan Trefler Compare With Other Companies In The Industry?
At the time of writing, our data shows that Pegasystems Inc. has a market capitalization of US$11b, and reported total annual CEO compensation of US$5.9m for the year to December 2020. This means that the compensation hasn't changed much from last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$495k.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$9.8m. In other words, Pegasystems pays its CEO lower than the industry median. Furthermore, Alan Trefler directly owns US$5.3b worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 11% of total compensation represents salary, while the remainder of 89% is other remuneration. It's interesting to note that Pegasystems allocates a smaller portion of compensation to salary in comparison 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 Pegasystems Inc.'s Growth Numbers
Pegasystems Inc. has reduced its earnings per share by 76% a year over the last three years. Its revenue is up 10% over the last year.
Few shareholders would be pleased to read that EPS have declined. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Pegasystems Inc. Been A Good Investment?
We think that the total shareholder return of 126%, over three years, would leave most Pegasystems Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. These concerns could be addressed to the board and shareholders should revisit their investment thesis to see if it still makes sense.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 2 warning signs for Pegasystems (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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