U.S. Markets open in 7 hrs 12 mins

How Should Investors React To Alterity Therapeutics Limited's (ASX:ATH) CEO Pay?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

In 2005, Geoffrey Kempler was appointed CEO of Alterity Therapeutics Limited (ASX:ATH). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Alterity Therapeutics

How Does Geoffrey Kempler's Compensation Compare With Similar Sized Companies?

Our data indicates that Alterity Therapeutics Limited is worth AU$20m, and total annual CEO compensation was reported as AU$424k for the year to June 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$396k. We examined a group of similar sized companies, with market capitalizations of below AU$313m. The median CEO total compensation in that group is AU$388k.

Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Talking in terms of the sector, salary represented approximately 63% of total compensation out of all the companies we analysed, while other remuneration made up 37% of the pie. Alterity Therapeutics is paying a higher share of its remuneration through a salary in comparison to the overall industry.

So Geoffrey Kempler receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see a visual representation of the CEO compensation at Alterity Therapeutics, below.

ASX:ATH CEO Compensation April 21st 2020
ASX:ATH CEO Compensation April 21st 2020

Is Alterity Therapeutics Limited Growing?

Alterity Therapeutics Limited has reduced its earnings per share by an average of 9.0% a year, over the last three years (measured with a line of best fit). Its revenue is up 7.5% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Alterity Therapeutics Limited Been A Good Investment?

Given the total loss of 72% over three years, many shareholders in Alterity Therapeutics Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Remuneration for Geoffrey Kempler is close enough to the median pay for a CEO of a similar sized company .

Returns have been disappointing and the company is not growing its earnings per share. Suffice it to say, we don't think the CEO is underpaid! CEO compensation is an important area to keep your eyes on, but we've also identified 6 warning signs for Alterity Therapeutics (1 can't be ignored!) 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.