Key Insights

• Etsy's Annual General Meeting to take place on 13th of June
• CEO Josh Silverman's total compensation includes salary of US$652.6k
• The overall pay is 210% above the industry average
• Etsy's EPS declined by 13% over the past three years while total shareholder loss over the past three years was 60%

Shareholders will probably not be too impressed with the underwhelming results at Etsy, Inc. (NASDAQ:ETSY) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 13th of June. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

How Does Total Compensation For Josh Silverman Compare With Other Companies In The Industry?

At the time of writing, our data shows that Etsy, Inc. has a market capitalization of US$7.6b, and reported total annual CEO compensation of US$17m for the year to December 2023. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$653k.

On examining similar-sized companies in the American Multiline Retail industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$5.3m. This suggests that Josh Silverman is paid more than the median for the industry. Furthermore, Josh Silverman directly owns US$14m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 17% of total compensation represents salary, while the remainder of 83% is other remuneration. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to Josh Silverman as compared to non-salary compensation over the one-year period examined. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Etsy, Inc.'s Growth Numbers

Over the last three years, Etsy, Inc. has shrunk its earnings per share by 13% per year. In the last year, its revenue is up 4.8%.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Etsy, Inc. Been A Good Investment?

With a total shareholder return of -60% over three years, Etsy, Inc. shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Etsy prefers rewarding its CEO through non-salary benefits. 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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas.

Arguably, business quality is much more important than CEO compensation levels.

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.