U.S. Markets closed

What Can We Make Of Aurizon Holdings' (ASX:AZJ) CEO Compensation?

Simply Wall St
·3 mins read

Tony Harding has been the CEO of Aurizon Holdings Limited (ASX:AZJ) since 2016, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Aurizon Holdings

How Does Total Compensation For Tony Harding Compare With Other Companies In The Industry?

At the time of writing, our data shows that Aurizon Holdings Limited has a market capitalization of AU$7.8b, and reported total annual CEO compensation of AU$4.3m for the year to June 2020. That's just a smallish increase of 4.7% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$1.7m.

On comparing similar companies from the same industry with market caps ranging from AU$5.6b to AU$17b, we found that the median CEO total compensation was AU$3.7m. From this we gather that Tony Harding is paid around the median for CEOs in the industry. Furthermore, Tony Harding directly owns AU$164k worth of shares in the company.

Component

2020

2019

Proportion (2020)

Salary

AU$1.7m

AU$1.7m

39%

Other

AU$2.6m

AU$2.5m

61%

Total Compensation

AU$4.3m

AU$4.1m

100%

On an industry level, around 53% of total compensation represents salary and 47% is other remuneration. In Aurizon Holdings' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

A Look at Aurizon Holdings Limited's Growth Numbers

Aurizon Holdings Limited has seen its earnings per share (EPS) increase by 51% a year over the past three years. It achieved revenue growth of 5.4% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. 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 Aurizon Holdings Limited Been A Good Investment?

Since shareholders would have lost about 4.5% over three years, some Aurizon Holdings Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we noted earlier, Aurizon Holdings pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, shareholder returns paint a sorry picture for the company, finishing in the red over the last three years. However, EPS growth is positive over the same time frame. Considering positive EPS growth, we'd say compensation is fair, but shareholders may be wary of a bump in pay before the company logs positive returns.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for Aurizon Holdings (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.

This article by Simply Wall St is general in nature. 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@simplywallst.com.