Shareholders will be pleased by the robust performance of Wesfarmers Limited (ASX:WES) recently and this will be kept in mind in the upcoming AGM on 27 October 2022. The focus will probably be on the future strategic initiatives that the board and management will put in place to improve the business rather than executive remuneration when they cast their votes on company resolutions. In our analysis below, we discuss why we think the CEO compensation looks acceptable and the case for a raise.
How Does Total Compensation For Rob Scott Compare With Other Companies In The Industry?
According to our data, Wesfarmers Limited has a market capitalization of AU$51b, and paid its CEO total annual compensation worth AU$8.0m over the year to June 2022. That's a notable increase of 15% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$2.3m.
In comparison with other companies in the industry with market capitalizations over AU$13b, the reported median total CEO compensation was AU$21m. That is to say, Rob Scott is paid under the industry median. What's more, Rob Scott holds AU$26m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 34% of total compensation represents salary, while the remainder of 66% is other remuneration. It's interesting to note that Wesfarmers allocates a smaller portion of compensation to salary 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.
A Look at Wesfarmers Limited's Growth Numbers
Wesfarmers Limited's earnings per share (EPS) grew 6.5% per year over the last three years. In the last year, its revenue is up 8.5%.
We're not particularly impressed by the revenue growth, but we're happy with the modest EPS growth. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. 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 Wesfarmers Limited Been A Good Investment?
Wesfarmers Limited has served shareholders reasonably well, with a total return of 27% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
The company's overall performance, while not bad, could be better. If it continues on the same road, shareholders might feel even more confident about their investment, and have little to no objections concerning CEO pay. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Wesfarmers that you should be aware of before investing.
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.
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