Here's Why Some Shareholders May Not Be Too Generous With Power Integrations, Inc.'s (NASDAQ:POWI) CEO Compensation This Year
Key Insights
Power Integrations' Annual General Meeting to take place on 17th of May
Salary of US$706.3k is part of CEO Balu Balakrishnan's total remuneration
Total compensation is similar to the industry average
Over the past three years, Power Integrations' EPS fell by 16% and over the past three years, the total shareholder return was 0.4%
Share price growth at Power Integrations, Inc. (NASDAQ:POWI) has remained rather flat over the last few years and it may be because earnings has struggled to grow at all. The upcoming AGM on 17th of May may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
Check out our latest analysis for Power Integrations
How Does Total Compensation For Balu Balakrishnan Compare With Other Companies In The Industry?
Our data indicates that Power Integrations, Inc. has a market capitalization of US$4.4b, and total annual CEO compensation was reported as US$8.2m for the year to December 2023. Notably, that's an increase of 17% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$706k.
On examining similar-sized companies in the American Semiconductor industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$7.3m. From this we gather that Balu Balakrishnan is paid around the median for CEOs in the industry. What's more, Balu Balakrishnan holds US$34m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2023 | 2022 | Proportion (2023) |
Salary | US$706k | US$691k | 9% |
Other | US$7.5m | US$6.3m | 91% |
Total Compensation | US$8.2m | US$7.0m | 100% |
Talking in terms of the industry, salary represented approximately 11% of total compensation out of all the companies we analyzed, while other remuneration made up 89% of the pie. It's interesting to note that Power Integrations 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 Power Integrations, Inc.'s Growth Numbers
Over the last three years, Power Integrations, Inc. has shrunk its earnings per share by 16% per year. In the last year, its revenue is down 25%.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Power Integrations, Inc. Been A Good Investment?
Power Integrations, Inc. has generated a total shareholder return of 0.4% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.
To Conclude...
The flat share price growth combined with the the fact that earnings have failed to grow makes us wonder whether the share price will have any further strong momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
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 2 warning signs for Power Integrations that investors should be aware of in a dynamic business environment.
Switching gears from Power Integrations, 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.
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.
