Shareholders will probably not be too impressed with the underwhelming results at Washington Real Estate Investment Trust (NYSE:WRE) recently. At the upcoming AGM on 27 May 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.
View our latest analysis for Washington Real Estate Investment Trust
How Does Total Compensation For Paul McDermott Compare With Other Companies In The Industry?
Our data indicates that Washington Real Estate Investment Trust has a market capitalization of US$1.9b, and total annual CEO compensation was reported as US$4.6m for the year to December 2020. We note that’s an increase of 19% above last year. While this analysis focuses on total compensation, it’s worth acknowledging that the salary portion is lower, valued at US$750k.
In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$4.2m. So it looks like Washington Real Estate Investment Trust compensates Paul McDermott in line with the median for the industry. Moreover, Paul McDermott also holds US$8.9m worth of Washington Real Estate Investment Trust stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 15% of total compensation represents salary, while the remainder of 85% is other remuneration. There isn’t a significant difference between Washington Real Estate Investment Trust and the broader market, in terms of salary allocation in the overall compensation package. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
NYSE:WRE CEO Compensation May 21st 2021
A Look at Washington Real Estate Investment Trust’s Growth Numbers
Over the last three years, Washington Real Estate Investment Trust has shrunk its funds from operations (FFO) by 6.7% per year. In the last year, its revenue is down 8.8%.
The decline in FFO is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company’s future earnings..
Has Washington Real Estate Investment Trust Been A Good Investment?
Since shareholders would have lost about 7.7% over three years, some Washington Real Estate Investment Trust investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
Not only have shareholders not seen a favorable return on their investment, but the business hasn’t performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.
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 3 warning signs for Washington Real Estate Investment Trust (of which 1 shouldn’t be ignored!) 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.
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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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