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How Should Investors Feel About Fletcher Building's (NZSE:FBU) CEO Remuneration?

·3 min read

Ross Taylor has been the CEO of Fletcher Building Limited (NZSE:FBU) since 2017, 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.

Check out our latest analysis for Fletcher Building

Comparing Fletcher Building Limited's CEO Compensation With the industry

According to our data, Fletcher Building Limited has a market capitalization of NZ$5.4b, and paid its CEO total annual compensation worth NZ$4.0m over the year to June 2020. That's a notable decrease of 24% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at NZ$1.9m.

In comparison with other companies in the industry with market capitalizations ranging from NZ$2.8b to NZ$8.9b, the reported median CEO total compensation was NZ$2.9m. This suggests that Ross Taylor is paid more than the median for the industry. What's more, Ross Taylor holds NZ$9.1m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2020

2019

Proportion (2020)

Salary

NZ$1.9m

NZ$2.1m

47%

Other

NZ$2.1m

NZ$3.3m

53%

Total Compensation

NZ$4.0m

NZ$5.3m

100%

Talking in terms of the industry, salary represented approximately 51% of total compensation out of all the companies we analyzed, while other remuneration made up 49% of the pie. There isn't a significant difference between Fletcher Building and the broader market, in terms of salary allocation in the overall compensation package. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
ceo-compensation

A Look at Fletcher Building Limited's Growth Numbers

Fletcher Building Limited's earnings per share (EPS) grew 48% per year over the last three years. Its revenue is down 12% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Fletcher Building Limited Been A Good Investment?

Since shareholders would have lost about 6.6% over three years, some Fletcher Building Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As previously discussed, Ross is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. But the company has impressed with its EPS growth, but it's disappointing to see negative shareholder returns over the same period. Although we'd stop short of calling it inappropriate, we think Ross is earning a very handsome sum.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 2 warning signs for Fletcher Building you should be aware of, and 1 of them is a bit unpleasant.

Switching gears from Fletcher Building, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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 (at) simplywallst.com.