This article will reflect on the compensation paid to Patrick Mahaffy who has served as CEO of Clovis Oncology, Inc. (NASDAQ:CLVS) since 2009. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
See our latest analysis for Clovis Oncology
Comparing Clovis Oncology, Inc.’s CEO Compensation With the industry
According to our data, Clovis Oncology, Inc. has a market capitalization of US$489m, and paid its CEO total annual compensation worth US$6.9m over the year to December 2019. Notably, that’s an increase of 10% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$719k.
For comparison, other companies in the same industry with market capitalizations ranging between US$200m and US$800m had a median total CEO compensation of US$2.2m. Hence, we can conclude that Patrick Mahaffy is remunerated higher than the industry median. What’s more, Patrick Mahaffy holds US$5.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
|
Component |
2019 |
2018 |
Proportion (2019) |
|
Salary |
US$719k |
US$689k |
10% |
|
Other |
US$6.2m |
US$5.6m |
90% |
|
Total Compensation |
US$6.9m |
US$6.3m |
100% |
On an industry level, roughly 23% of total compensation represents salary and 77% is other remuneration. Clovis Oncology pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Clovis Oncology, Inc.’s Growth Numbers
Over the past three years, Clovis Oncology, Inc. has seen its earnings per share (EPS) grow by 5.9% per year. It achieved revenue growth of 34% over the last year.
We like the look of the strong year-on-year improvement in revenue. And in that context, the modest EPS improvement certainly isn’t shabby. We’d stop short of saying the business performance is amazing, but there are enough positives to justify further research, or even adding the stock to your watch-list. 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 Clovis Oncology, Inc. Been A Good Investment?
Given the total shareholder loss of 93% over three years, many shareholders in Clovis Oncology, Inc. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
In Summary…
As we touched on above, Clovis Oncology, Inc. is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. The growth in the business has been uninspiring, but the shareholder returns for Clovis Oncology have arguably been worse, over the last three years. This doesn’t look great when you consider Patrick is taking home compensation north of the industry average. Taking all this into account, it could be hard to get shareholder support for giving Patrick a raise.
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 4 warning signs for Clovis Oncology (of which 1 doesn’t sit too well with us!) 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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