This article will reflect on the compensation paid to David Overton who has served as CEO of The Cheesecake Factory Incorporated (NASDAQ:CAKE) since 1992. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Cheesecake Factory.
View our latest analysis for Cheesecake Factory
How Does Total Compensation For David Overton Compare With Other Companies In The Industry?
Our data indicates that The Cheesecake Factory Incorporated has a market capitalization of US$1.4b, and total annual CEO compensation was reported as US$6.7m for the year to December 2019. That’s a modest increase of 7.2% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$995k.
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$5.9m. So it looks like Cheesecake Factory compensates David Overton in line with the median for the industry. Moreover, David Overton also holds US$99m worth of Cheesecake Factory stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2019 | 2019 | Proportion (2019) |
| Salary | US$995k | US$995k | 15% |
| Other | US$5.7m | US$5.3m | 85% |
| Total Compensation | US$6.7m | US$6.3m | 100% |
On an industry level, around 25% of total compensation represents salary and 75% is other remuneration. In Cheesecake Factory’s case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. 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 The Cheesecake Factory Incorporated’s Growth Numbers
Over the last three years, The Cheesecake Factory Incorporated has shrunk its earnings per share by 75% per year. Its revenue is down 11% over the previous year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. 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 The Cheesecake Factory Incorporated Been A Good Investment?
With a three year total loss of 23% for the shareholders, The Cheesecake Factory Incorporated would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
To Conclude…
As we noted earlier, Cheesecake Factory pays its CEO in line with similar-sized companies belonging to the same industry. On the other hand, EPS growth and total shareholder return have been negative for the last three years. We’d stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That’s why we did some digging and identified 2 warning signs for Cheesecake Factory that investors should think about before committing capital to this stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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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