Key Insights

• Lumentum Holdings will host its Annual General Meeting on 20th of November
• CEO Alan Lowe's total compensation includes salary of US$903.8k
• The total compensation is 2,626% higher than the average for the industry
• Lumentum Holdings' three-year loss to shareholders was 3.7% while its EPS was down 124% over the past three years

The results at Lumentum Holdings Inc. (NASDAQ:LITE) have been quite disappointing recently and CEO Alan Lowe bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 20th of November. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Comparing Lumentum Holdings Inc.'s CEO Compensation With The Industry

At the time of writing, our data shows that Lumentum Holdings Inc. has a market capitalization of US$6.0b, and reported total annual CEO compensation of US$12m for the year to June 2024. That's a notable decrease of 13% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$904k.

On comparing similar companies from the American Communications industry with market caps ranging from US$4.0b to US$12b, we found that the median CEO total compensation was US$443k. Hence, we can conclude that Alan Lowe is remunerated higher than the industry median. Moreover, Alan Lowe also holds US$11m worth of Lumentum Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 20% of total compensation out of all the companies we analyzed, while other remuneration made up 80% of the pie. In Lumentum Holdings' 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.

Lumentum Holdings Inc.'s Growth

Over the last three years, Lumentum Holdings Inc. has shrunk its earnings per share by 124% per year. In the last year, its revenue is down 13%.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Lumentum Holdings Inc. Been A Good Investment?

Given the total shareholder loss of 3.7% over three years, many shareholders in Lumentum Holdings Inc. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid 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, 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. We did our research and identified 2 warning signs (and 1 which makes us a bit uncomfortable) in Lumentum Holdings we think you should know about.

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.