Key Insights

• Select Medical Holdings to hold its Annual General Meeting on 25th of April
• CEO David Chernow's total compensation includes salary of US$995.0k
• The total compensation is 48% higher than the average for the industry
• Select Medical Holdings' EPS declined by 1.7% over the past three years while total shareholder loss over the past three years was 24%

The results at Select Medical Holdings Corporation (NYSE:SEM) have been quite disappointing recently and CEO David Chernow bears some responsibility for this. At the upcoming AGM on 25th of April, shareholders can hear from the board including their plans for turning around performance. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Select Medical Holdings

How Does Total Compensation For David Chernow Compare With Other Companies In The Industry?

Our data indicates that Select Medical Holdings Corporation has a market capitalization of US$3.4b, and total annual CEO compensation was reported as US$11m for the year to December 2023. We note that's an increase of 22% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$995k.

On examining similar-sized companies in the American Healthcare industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$7.2m. Hence, we can conclude that David Chernow is remunerated higher than the industry median. Furthermore, David Chernow directly owns US$25m 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. Select Medical Holdings sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Select Medical Holdings Corporation's Growth

Over the last three years, Select Medical Holdings Corporation has shrunk its earnings per share by 1.7% per year. In the last year, its revenue is up 5.2%.

A lack of EPS improvement is not good to see. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Select Medical Holdings Corporation Been A Good Investment?

Given the total shareholder loss of 24% over three years, many shareholders in Select Medical Holdings Corporation are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO 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. In our study, we found 2 warning signs for Select Medical Holdings you should be aware of, and 1 of them is concerning.

Important note: Select Medical Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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.