Is Neil Ashe Tom Brady?

 NBC News Must Think So

This story was updated on 14 ARP, 12:24 EST to reflect performance-based options and to add a statement from a company spokesman. Updates are in italics.

Editor’s Note:  As I began writing this article, my goal was to show that Mr. Ashe’s total compensation is in line with other CEO’s such as Coca-Cola and Delta Airlines, but far greater than most in the lighting or electrical industry.  My opinion changed as I learned the details of his compensation that were not included in the NBC report.   I strongly believe in the free market and people, including CEOs, should be able to earn as much money as they can earn.

We delved into NBC’s report that claimed Neil Ashe, the Acuity President & CEO earned an exorbitant compensation as compared to the average Acuity worker. The problem with the NBC analysis is that the numerator is not correct.   Mr. Ashe did not receive $19.8M in 2020, he only received about $1.7M in 2020.  Yes, he did receive options worth $18M, but those options are contingent upon meeting huge metrics, which he has not yet met.

In reading the NBC story, I felt there were three only conclusions a reader could make:  Acuity’s CEO is grossly overpaid, the employees are underpaid, or a combination of both.  This article will deal only the compensation issue.

First, let’s look at Acuity’s 2020 compensation calculation of CEO Neil Ashe:

Base Pay $648,551
Bonus + Non-Equity Incentive Comp $1,070,700
Total Cash Comp $1,719,251
Stock Award Value $0
Option Award Value $18,159,500
Total Equity $18,159,500
Total Other $9,000
Total Compensation for 2020 $19,887,751

The NBC report claims Mr. Ashe’s compensation is 2316 times the median salary of Acuity employees. (An earlier headline of an EdisonReport story mistakenly said average.)  That would mean the median annual compensation would be $8587 per employee and that makes sense given their large manufacturing presence in Mexico.

We compared Mr. Ashe’s 2020 salary to CEOs in other companies for 2019.  Eric Rondolat of Signify earned $3,328,668.  Hubbell CEO David Nord earned $2,935,934. We also compared his compensation to his peers in Atlanta.  James Quincy of Coca-Cola earned $18,000,995.  Edward H. Bastian, CEO of Delta airlines, earned $17,291,985. Home Depot’s Craig Menear made $10,889,833 in total compensation.

Annual Sales Comparison:

Company  CEO Salary 2020 Annual Revenue in Billions
Acuity $19,887,751 $3.30
Coca-Cola $18,000,995 $33.01
Delta Airlines $17,291,985 $15.98
Home Depot $10,889,833 $110.00
Hubbell $2,935,934 $4.20
Signify $3,328,668 $7.73

The Coca-Cola CEO has a similar package, but Coke has 10X the sales of Acuity and Coca-Cola is a global company. Hubbell (the entire company, not just Lighting) has higher revenue than Acuity, yet the Hubbell CEO earns about 1/5th of the Acuity CEO if you believe the NBC report.

Market Capitalization

 

The market capitalization numbers don’t look any better.  Acuity and Signify have similar market caps, yet if we used the numerator from NBC, it would appear that Mr. Ashe earned more than Mr. Rondolat by a factor of 5. But that did not happen.

An Acuity spokesman told the EdisonReport, “The Acuity compensation structure for all executive officers is deliberately designed to align with company strategy and performance, and Neil Ashe’s equity awards, which were granted in connection with his hire, consist of both time-based and performance-based stock options.

The time-based stock options only have value when the stock price goes up and the performance-based stock options have very aggressive performance hurdles that must be met to have any value.”

We took a close look at Mr. Ashe’s compensation and your humble editor has seen his employment letter.  Mr. Ashe, and his team, have a herculean task ahead, as the options are based on a significant appreciation of the Acuity stock price.  According to his contract, Mr. Ashe is only paid for his performance-based options when the stock reaches $225 per share—and it has to close above $225 per share for 10 consecutive days.  Mr. Ashe receives a second performance-based payout if and when the stock reaches $275 per share—again the closing price must hold for 10 days.

Acuity closed yesterday at $172.72.

While the NBC story was accurate, and headline generating, it did not tell the entire story.  The NBC report must make the assumption that he will meet those lofty goals.  Mr. Ashe’s true compensation, money in his checking account for 2020, was only 12% of what NBC reported.

On 8 JAN 2020, when Neil Ashe was announced as CEO, the stock closed at $143.12. The following day, when shareholders had time to digest the news, the stock dropped to $123.42.   In essence, the stock has gained about 50 points since his announcement—but he does not earn a dime of those options until the stock hits $225, so he is almost halfway there.

Also, the NBC story failed to mention some other cool facts about Acuity.    Last month, Acuity Brands announced they reached carbon neutrality.  In addition, Acuity has made key advancements in diversity and inclusion and their commitment to ESG, called EarthLIGHT.  While many of these activities were started during Mr. Nagel’s tenure, they have grown and prospered during Mr. Ashes’ tenure.

If Mr. Ashe is Tom Brady and able to get the stock to $275 per share and win the the big game, he should be compensated accordingly.  If he gets to the playoffs at $225 per share, he should be awarded some options.  But if he doesn’t make the playoffs and doesn’t get the stock to $225, then he is stuck with his base salary, which is quite low as compared to his peers, a fact NBC failed to mention.

While the focus of this article has been on the compensation of current CEO Neil Ashe, we would be remiss if we did not mention, the former CEO, Vern Nagel, who retired as Executive Chairman in January of this year. Mr. Nagel is credited with building Acuity Brands.  Mr. Nagel was the EdisonReport Person of the Year in 2015 and again in 2018.  He is the only person in our 21-year history to receive this award twice.

 

 

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