We have been pretty impressed with the performance at KLA Corporation (NASDAQ:KLAC) recently and CEO Rick Wallace deserves a mention for their role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 02 November 2022. The focus will probably be on the future company strategy as shareholders cast their votes on resolutions such as executive remuneration and other matters. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.
Comparing KLA Corporation's CEO Compensation With The Industry
At the time of writing, our data shows that KLA Corporation has a market capitalization of US$43b, and reported total annual CEO compensation of US$21m for the year to June 2022. Notably, that's an increase of 50% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$997k.
In comparison with other companies in the industry with market capitalizations over US$8.0b, the reported median total CEO compensation was US$19m. From this we gather that Rick Wallace is paid around the median for CEOs in the industry. Furthermore, Rick Wallace directly owns US$16m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 12% of total compensation represents salary and 88% is other remuneration. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to Rick Wallace as compared to non-salary compensation over the one-year period examined. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
KLA Corporation's Growth
KLA Corporation has seen its earnings per share (EPS) increase by 46% a year over the past three years. Its revenue is up 33% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. 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 KLA Corporation Been A Good Investment?
Most shareholders would probably be pleased with KLA Corporation for providing a total return of 85% over three years. 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.
KLA primarily uses non-salary benefits to reward its CEO. The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.
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. That's why we did our research, and identified 3 warning signs for KLA (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.
Switching gears from KLA, 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.
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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.
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