How Is Australian Finance Group's (ASX:AFG) CEO Paid Relative To Peers?
David Bailey became the CEO of Australian Finance Group Limited (ASX:AFG) in 2017, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Australian Finance Group.
See our latest analysis for Australian Finance Group
How Does Total Compensation For David Bailey Compare With Other Companies In The Industry?
Our data indicates that Australian Finance Group Limited has a market capitalization of AU$735m, and total annual CEO compensation was reported as AU$1.2m for the year to June 2020. Notably, that's an increase of 14% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$551k.
On examining similar-sized companies in the industry with market capitalizations between AU$261m and AU$1.0b, we discovered that the median CEO total compensation of that group was AU$1.3m. This suggests that Australian Finance Group remunerates its CEO largely in line with the industry average. Moreover, David Bailey also holds AU$3.3m worth of Australian Finance Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | AU$551k | AU$540k | 47% |
Other | AU$629k | AU$491k | 53% |
Total Compensation | AU$1.2m | AU$1.0m | 100% |
On an industry level, around 78% of total compensation represents salary and 22% is other remuneration. It's interesting to note that Australian Finance Group allocates a smaller portion of compensation to salary 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.
A Look at Australian Finance Group Limited's Growth Numbers
Australian Finance Group Limited has reduced its earnings per share by 1.6% a year over the last three years. Its revenue is up 6.1% over the last year.
The lack of EPS growth is certainly unimpressive. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Australian Finance Group Limited Been A Good Investment?
Most shareholders would probably be pleased with Australian Finance Group Limited for providing a total return of 108% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
As we noted earlier, Australian Finance Group pays its CEO in line with similar-sized companies belonging to the same industry. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We wouldn't say CEO compensation is too high, but shrinking EPS is undoubtedly an issue that will have to be addressed.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 3 warning signs for Australian Finance Group that investors should be aware of in a dynamic business environment.
Important note: Australian Finance 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. 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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