This article will reflect on the compensation paid to Tim Hart who has served as CEO of Fremont Petroleum Corporation Ltd (ASX:FPL) since 2016. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Tim Hart Compare With Other Companies In The Industry?
According to our data, Fremont Petroleum Corporation Ltd has a market capitalization of AU$12m, and paid its CEO total annual compensation worth AU$229k over the year to June 2020. Notably, that's a decrease of 37% over the year before. In particular, the salary of AU$190.6k, makes up a huge portion of the total compensation being paid to the CEO.
On comparing similar-sized companies in the industry with market capitalizations below AU$263m, we found that the median total CEO compensation was AU$351k. This suggests that Tim Hart is paid below the industry median. Furthermore, Tim Hart directly owns AU$69k worth of shares in the company.
Talking in terms of the industry, salary represented approximately 76% of total compensation out of all the companies we analyzed, while other remuneration made up 24% of the pie. Although there is a difference in how total compensation is set, Fremont Petroleum more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
Fremont Petroleum Corporation Ltd's Growth
Fremont Petroleum Corporation Ltd's earnings per share (EPS) grew 88% per year over the last three years. Its revenue is down 44% over the previous year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Fremont Petroleum Corporation Ltd Been A Good Investment?
Since shareholders would have lost about 50% over three years, some Fremont Petroleum Corporation Ltd investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.
As we touched on above, Fremont Petroleum Corporation Ltd is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. However we must not forget that the EPS growth has been very strong over three years. Although we would've liked to see positive investor returns, it would be bold of us to criticize CEO compensation when EPS are up. Shareholders, though, would ideally like to see shareholder returns head north before they agree to any raise.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 4 warning signs for Fremont Petroleum you should be aware of, and 3 of them shouldn't be ignored.
Important note: Fremont Petroleum 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. 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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