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Despite Argo Group Limited's (LON:ARGO) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 30 September 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
Comparing Argo Group Limited's CEO Compensation With the industry
Our data indicates that Argo Group Limited has a market capitalization of UK£7.4m, and total annual CEO compensation was reported as US$217k for the year to December 2020. That is, the compensation was roughly the same as last year. Notably, the salary of US$217k is the entirety of the CEO compensation.
On comparing similar-sized companies in the industry with market capitalizations below UK£146m, we found that the median total CEO compensation was US$243k. So it looks like Argo Group compensates Kyriakos Rialas in line with the median for the industry. Furthermore, Kyriakos Rialas directly owns UK£1.7m worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 48% of total compensation out of all the companies we analyzed, while other remuneration made up 52% of the pie. At the company level, Argo Group pays Kyriakos Rialas solely through a salary, preferring to go down a conventional route. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Argo Group Limited's Growth Numbers
Over the last three years, Argo Group Limited has shrunk its earnings per share by 19% per year. Its revenue is up 4.4% over the last year.
The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Argo Group Limited Been A Good Investment?
With a total shareholder return of 7.0% over three years, Argo Group Limited has done okay by shareholders, but there's always room for improvement. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.
Argo Group pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 4 warning signs for Argo Group (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.
Important note: Argo Group 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. 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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