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Here's Why Shareholders May Want To Be Cautious With Increasing Central Petroleum Limited's (ASX:CTP) CEO Pay Packet

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As many shareholders of Central Petroleum Limited (ASX:CTP) will be aware, they have not made a gain on their investment in the past three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 10 November 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

Check out our latest analysis for Central Petroleum

How Does Total Compensation For Leon Devaney Compare With Other Companies In The Industry?

Our data indicates that Central Petroleum Limited has a market capitalization of AU$91m, and total annual CEO compensation was reported as AU$1.0m for the year to June 2021. That's a notable increase of 20% on last year. We note that the salary of AU$623.3k makes up a sizeable portion of the total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below AU$269m, reported a median total CEO compensation of AU$315k. Accordingly, our analysis reveals that Central Petroleum Limited pays Leon Devaney north of the industry median. Moreover, Leon Devaney also holds AU$326k worth of Central Petroleum stock directly under their own name.

Component

2021

2020

Proportion (2021)

Salary

AU$623k

AU$601k

60%

Other

AU$424k

AU$273k

40%

Total Compensation

AU$1.0m

AU$874k

100%

Talking in terms of the industry, salary represented approximately 71% of total compensation out of all the companies we analyzed, while other remuneration made up 29% of the pie. It's interesting to note that Central Petroleum allocates a smaller portion of compensation to salary in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ceo-compensation

A Look at Central Petroleum Limited's Growth Numbers

Central Petroleum Limited has seen its earnings per share (EPS) increase by 99% a year over the past three years. In the last year, its revenue is down 8.0%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Central Petroleum Limited Been A Good Investment?

With a three year total loss of 7.4% for the shareholders, Central Petroleum Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 1 which is significant) in Central Petroleum we think you should know about.

Switching gears from Central Petroleum, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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 (at) simplywallst.com.

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