Yahoo Finance Should Shareholders Reconsider Cleveland-Cliffs Inc.'s (NYSE:CLF) CEO Compensation Package?
Key Insights
Cleveland-Cliffs' Annual General Meeting to take place on 16th of May
Total pay for CEO C. Goncalves includes US$2.12m salary
The overall pay is 285% above the industry average
Over the past three years, Cleveland-Cliffs' EPS fell by 36% and over the past three years, the total loss to shareholders 12%
The results at Cleveland-Cliffs Inc. (NYSE:CLF) have been quite disappointing recently and CEO C. Goncalves bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 16th of May. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.
View our latest analysis for Cleveland-Cliffs
Comparing Cleveland-Cliffs Inc.'s CEO Compensation With The Industry
According to our data, Cleveland-Cliffs Inc. has a market capitalization of US$8.2b, and paid its CEO total annual compensation worth US$26m over the year to December 2023. Notably, that's an increase of 42% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$2.1m.
For comparison, other companies in the American Metals and Mining industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$6.8m. Hence, we can conclude that C. Goncalves is remunerated higher than the industry median. Moreover, C. Goncalves also holds US$89m worth of Cleveland-Cliffs stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2023 | 2022 | Proportion (2023) |
Salary | US$2.1m | US$2.0m | 8% |
Other | US$24m | US$16m | 92% |
Total Compensation | US$26m | US$18m | 100% |
On an industry level, around 30% of total compensation represents salary and 70% is other remuneration. In Cleveland-Cliffs' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Cleveland-Cliffs Inc.'s Growth
Over the last three years, Cleveland-Cliffs Inc. has shrunk its earnings per share by 36% per year. Its revenue is down 1.9% over the previous year.
The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-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 Cleveland-Cliffs Inc. Been A Good Investment?
With a three year total loss of 12% for the shareholders, Cleveland-Cliffs Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
To Conclude...
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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in 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. That's why we did some digging and identified 2 warning signs for Cleveland-Cliffs that investors should think about before committing capital to this 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. 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.
