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Tim Salt became the CEO of GWA Group Limited (ASX:GWA) in 2016, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Tim Salt Compare With Other Companies In The Industry?
Our data indicates that GWA Group Limited has a market capitalization of AU$1.0b, and total annual CEO compensation was reported as AU$1.7m for the year to June 2020. Notably, that's a decrease of 9.4% over the year before. Notably, the salary which is AU$967.5k, represents most of the total compensation being paid.
On comparing similar companies from the same industry with market caps ranging from AU$523m to AU$2.1b, we found that the median CEO total compensation was AU$1.4m. So it looks like GWA Group compensates Tim Salt in line with the median for the industry. Furthermore, Tim Salt directly owns AU$2.7m worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 63% of total compensation out of all the companies we analyzed, while other remuneration made up 37% of the pie. There isn't a significant difference between GWA Group and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at GWA Group Limited's Growth Numbers
Over the last three years, GWA Group Limited has shrunk its earnings per share by 3.8% per year. It achieved revenue growth of 4.4% over the last year.
The decline in EPS is a bit concerning. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has GWA Group Limited Been A Good Investment?
We think that the total shareholder return of 64%, over three years, would leave most GWA Group Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As previously discussed, Tim is compensated close to the median for companies of its size, and which belong 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 flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We're not saying CEO compensation is too generous, but shrinking EPS is undoubtedly an issue that will have to be addressed.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 3 warning signs for GWA Group that investors should look into moving forward.
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.
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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