Most Shareholders Will Probably Find That The CEO Compensation For Exchange Income Corporation (TSE:EIF) Is Reasonable
Exchange Income Corporation (TSE:EIF) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 14 May 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
View our latest analysis for Exchange Income
Comparing Exchange Income Corporation's CEO Compensation With the industry
At the time of writing, our data shows that Exchange Income Corporation has a market capitalization of CA$1.5b, and reported total annual CEO compensation of CA$1.7m for the year to December 2020. We note that's a decrease of 22% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at CA$654k.
For comparison, other companies in the same industry with market capitalizations ranging between CA$1.2b and CA$3.9b had a median total CEO compensation of CA$1.7m. From this we gather that Mike Pyle is paid around the median for CEOs in the industry. Moreover, Mike Pyle also holds CA$714k worth of Exchange Income stock directly under their own name.
Component | 2020 | 2019 | Proportion (2020) |
Salary | CA$654k | CA$746k | 38% |
Other | CA$1.1m | CA$1.4m | 62% |
Total Compensation | CA$1.7m | CA$2.2m | 100% |
On an industry level, roughly 21% of total compensation represents salary and 79% is other remuneration. Exchange Income pays out 38% of remuneration in the form of a salary, significantly higher than the industry average. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Exchange Income Corporation's Growth Numbers
Over the last three years, Exchange Income Corporation has shrunk its earnings per share by 30% per year. Its revenue is down 14% over the previous year.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Exchange Income Corporation Been A Good Investment?
Most shareholders would probably be pleased with Exchange Income Corporation for providing a total return of 45% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
To Conclude...
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 5 warning signs for Exchange Income (1 can't be ignored!) that you should be aware of before investing here.
Important note: Exchange Income is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
