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We Think Some Shareholders May Hesitate To Increase Elementis plc's (LON:ELM) CEO Compensation

Key Insights

  • Elementis' Annual General Meeting to take place on 30th of April

  • CEO Paul Waterman's total compensation includes salary of US$1.02m

  • The total compensation is 159% higher than the average for the industry

  • Elementis' EPS grew by 4.6% over the past three years while total shareholder loss over the past three years was 8.0%

In the past three years, shareholders of Elementis plc (LON:ELM) have seen a loss on their investment. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 30th of April. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Elementis

How Does Total Compensation For Paul Waterman Compare With Other Companies In The Industry?

At the time of writing, our data shows that Elementis plc has a market capitalization of UK£809m, and reported total annual CEO compensation of US$3.5m for the year to December 2023. That's a notable increase of 31% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.0m.

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On examining similar-sized companies in the British Chemicals industry with market capitalizations between UK£321m and UK£1.3b, we discovered that the median CEO total compensation of that group was US$1.4m. Accordingly, our analysis reveals that Elementis plc pays Paul Waterman north of the industry median. Furthermore, Paul Waterman directly owns UK£2.6m worth of shares in the company.

Component

2023

2022

Proportion (2023)

Salary

US$1.0m

US$941k

29%

Other

US$2.5m

US$1.7m

71%

Total Compensation

US$3.5m

US$2.7m

100%

Speaking on an industry level, nearly 74% of total compensation represents salary, while the remainder of 26% is other remuneration. Elementis pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

A Look at Elementis plc's Growth Numbers

Elementis plc has seen its earnings per share (EPS) increase by 4.6% a year over the past three years. It saw its revenue drop 3.1% over the last year.

We would argue that the lack of revenue growth in the last year is less than ideal, but the modest improvement in EPS is good. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Elementis plc Been A Good Investment?

Given the total shareholder loss of 8.0% over three years, many shareholders in Elementis plc are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 2 warning signs for Elementis that investors should be aware of in a dynamic business environment.

Important note: Elementis 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.