Key Insights

• Lear to hold its Annual General Meeting on 16th of May
• Total pay for CEO Ray Scott includes US$1.30m salary
• The overall pay is 166% above the industry average
• Lear's EPS grew by 26% over the past three years while total shareholder loss over the past three years was 25%

The underwhelming share price performance of Lear Corporation (NYSE:LEA) in the past three years would have disappointed many shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 16th of May could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

How Does Total Compensation For Ray Scott Compare With Other Companies In The Industry?

At the time of writing, our data shows that Lear Corporation has a market capitalization of US$7.3b, and reported total annual CEO compensation of US$19m for the year to December 2023. We note that's an increase of 23% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.

In comparison with other companies in the American Auto Components industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$7.1m. Hence, we can conclude that Ray Scott is remunerated higher than the industry median. Furthermore, Ray Scott directly owns US$1.8m worth of shares in the company.

Speaking on an industry level, nearly 13% of total compensation represents salary, while the remainder of 87% is other remuneration. In Lear's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Lear Corporation's Growth

Lear Corporation's earnings per share (EPS) grew 26% per year over the last three years. In the last year, its revenue is up 9.8%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Lear Corporation Been A Good Investment?

With a three year total loss of 25% for the shareholders, Lear Corporation would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 1 warning sign for Lear that investors should be aware of in a dynamic business environment.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.