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How Should Investors React To McMillan Shakespeare Limited's (ASX:MMS) CEO Pay?

Simply Wall St

Mike Salisbury has been the CEO of McMillan Shakespeare Limited (ASX:MMS) since 2014. First, this article will compare CEO compensation with compensation at similar sized companies. 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. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for McMillan Shakespeare

How Does Mike Salisbury's Compensation Compare With Similar Sized Companies?

Our data indicates that McMillan Shakespeare Limited is worth AU$1.3b, and total annual CEO compensation was reported as AU$788k for the year to June 2019. That's less than last year. Notably, the salary of AU$861k is the vast majority of the CEO compensation. We looked at a group of companies with market capitalizations from AU$587m to AU$2.3b, and the median CEO total compensation was AU$1.5m.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. Though positive, it's important we delve into the performance of the actual business.

The graphic below shows how CEO compensation at McMillan Shakespeare has changed from year to year.

ASX:MMS CEO Compensation, November 18th 2019

Is McMillan Shakespeare Limited Growing?

Over the last three years McMillan Shakespeare Limited has shrunk its earnings per share by an average of 17% per year (measured with a line of best fit). In the last year, its revenue changed by just 0.8%.

Unfortunately, earnings per share have trended lower over the last three years. And the flat revenue is seriously uninspiring. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has McMillan Shakespeare Limited Been A Good Investment?

Most shareholders would probably be pleased with McMillan Shakespeare Limited for providing a total return of 82% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

McMillan Shakespeare Limited is currently paying its CEO below what is normal for companies of its size.

Mike Salisbury is paid less than CEOs of similar size companies. While the company isn't growing on our analysis, shareholder returns have been good in recent years. So, while it would be nice to have EPS growth, on our analysis the CEO compensation is not an issue. So you may want to check if insiders are buying McMillan Shakespeare shares with their own money (free access).

If you want to buy a stock that is better than McMillan Shakespeare, this free list of high return, low debt companies is a great place to look.

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.

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. Thank you for reading.