Yahoo Finance This Is Why Shareholders Will Hold Back On A Pay Rise For Australian Ethical Investment Limited's (ASX:AEF) CEO This Year
Key Insights
Australian Ethical Investment's Annual General Meeting to take place on 15th of November
Total pay for CEO John McMurdo includes AU$493.7k salary
Total compensation is similar to the industry average
Australian Ethical Investment's total shareholder return over the past three years was 2.9% while its EPS was down 12% over the past three years
The anaemic share price growth at Australian Ethical Investment Limited (ASX:AEF) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. The upcoming AGM on 15th of November may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
See our latest analysis for Australian Ethical Investment
Comparing Australian Ethical Investment Limited's CEO Compensation With The Industry
Our data indicates that Australian Ethical Investment Limited has a market capitalization of AU$510m, and total annual CEO compensation was reported as AU$1.1m for the year to June 2023. That's mostly flat as compared to the prior year's compensation. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$494k.
On examining similar-sized companies in the Australian Capital Markets industry with market capitalizations between AU$311m and AU$1.2b, we discovered that the median CEO total compensation of that group was AU$1.1m. So it looks like Australian Ethical Investment compensates John McMurdo in line with the median for the industry. Moreover, John McMurdo also holds AU$81k worth of Australian Ethical Investment stock directly under their own name.
Component | 2023 | 2022 | Proportion (2023) |
Salary | AU$494k | AU$467k | 43% |
Other | AU$654k | AU$660k | 57% |
Total Compensation | AU$1.1m | AU$1.1m | 100% |
Talking in terms of the industry, salary represented approximately 65% of total compensation out of all the companies we analyzed, while other remuneration made up 35% of the pie. Australian Ethical Investment 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.
A Look at Australian Ethical Investment Limited's Growth Numbers
Australian Ethical Investment Limited has reduced its earnings per share by 12% a year over the last three years. It achieved revenue growth of 15% over the last year.
The decline in EPS is a bit concerning. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Australian Ethical Investment Limited Been A Good Investment?
Australian Ethical Investment Limited has generated a total shareholder return of 2.9% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.
In Summary...
While it's true that the share price growth hasn't been bad, it's hard to overlook the lack of earnings growth and this makes us question whether there will be any strong catalyst for the stock to improve. 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.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Australian Ethical Investment that investors should think about before committing capital to this stock.
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.
