In 2012 Dan Lougher was appointed CEO of Western Areas Limited (ASX:WSA). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Dan Lougher's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Western Areas Limited has a market cap of AU$816m, and reported total annual CEO compensation of AU$2.1m for the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$756k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from AU$287m to AU$1.1b, we found the median CEO total compensation was AU$1.0m.
It would therefore appear that Western Areas Limited pays Dan Lougher more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see a visual representation of the CEO compensation at Western Areas, below.
Is Western Areas Limited Growing?
Over the last three years Western Areas Limited has grown its earnings per share (EPS) by an average of 70% per year (using a line of best fit). It achieved revenue growth of 8.2% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has Western Areas Limited Been A Good Investment?
Since shareholders would have lost about 5.9% over three years, some Western Areas Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared the total CEO remuneration paid by Western Areas Limited, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
However, the earnings per share growth over three years is certainly impressive. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. So you may want to check if insiders are buying Western Areas shares with their own money (free access).
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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