Here's Why Shareholders Should Examine SecureWorks Corp.'s (NASDAQ:SCWX) CEO Compensation Package More Closely

editorial-team@simplywallst.com (Simply Wall St)

19 June 2024 at 7:18 am·3-min read

Key Insights

SecureWorks' Annual General Meeting to take place on 25th of June
CEO Wendy Thomas' total compensation includes salary of US$500.0k
Total compensation is 285% above industry average
SecureWorks' three-year loss to shareholders was 72% while its EPS was down 40% over the past three years

The results at SecureWorks Corp. (NASDAQ:SCWX) have been quite disappointing recently and CEO Wendy Thomas 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 25th of June. 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.

See our latest analysis for SecureWorks

Comparing SecureWorks Corp.'s CEO Compensation With The Industry

Our data indicates that SecureWorks Corp. has a market capitalization of US$537m, and total annual CEO compensation was reported as US$8.2m for the year to February 2024. That's a notable increase of 24% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$500k.

For comparison, other companies in the American Software industry with market capitalizations ranging between US$200m and US$800m had a median total CEO compensation of US$2.1m. Hence, we can conclude that Wendy Thomas is remunerated higher than the industry median. Furthermore, Wendy Thomas directly owns US$5.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	US$500k	US$519k	6%
Other	US$7.7m	US$6.1m	94%
Total Compensation	US$8.2m	US$6.6m	100%

On an industry level, around 16% of total compensation represents salary and 84% is other remuneration. SecureWorks sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at SecureWorks Corp.'s Growth Numbers

Over the last three years, SecureWorks Corp. has shrunk its earnings per share by 40% per year. In the last year, its revenue is down 18%.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. 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 SecureWorks Corp. Been A Good Investment?

Few SecureWorks Corp. shareholders would feel satisfied with the return of -72% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for SecureWorks (of which 1 shouldn't be ignored!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

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Key Insights

Comparing SecureWorks Corp.'s CEO Compensation With The Industry

A Look at SecureWorks Corp.'s Growth Numbers

Has SecureWorks Corp. Been A Good Investment?

To Conclude...

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