Frank Calabria became the CEO of Origin Energy Limited (ASX:ORG) 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 Frank Calabria Compare With Other Companies In The Industry?
At the time of writing, our data shows that Origin Energy Limited has a market capitalization of AU$8.4b, and reported total annual CEO compensation of AU$5.1m for the year to June 2020. That's a notable increase of 11% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$1.8m.
In comparison with other companies in the industry with market capitalizations ranging from AU$5.5b to AU$16b, the reported median CEO total compensation was AU$4.6m. This suggests that Origin Energy remunerates its CEO largely in line with the industry average. Moreover, Frank Calabria also holds AU$3.7m worth of Origin Energy stock directly under their own name.
Talking in terms of the industry, salary represented approximately 72% of total compensation out of all the companies we analyzed, while other remuneration made up 28% of the pie. Origin Energy sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Origin Energy Limited's Growth
Origin Energy Limited has seen its earnings per share (EPS) increase by 83% a year over the past three years. It saw its revenue drop 10% over the last 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 Origin Energy Limited Been A Good Investment?
Since shareholders would have lost about 33% over three years, some Origin Energy Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, Origin Energy Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. At the same time, the company has logged negative shareholder returns over the last three years. However, EPS growth is positive over the same time frame. Overall, we wouldn't say Frank is paid an unjustified compensation, but shareholders might not favor a raise before shareholder returns show a positive trend.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 5 warning signs for Origin Energy (of which 1 is a bit concerning!) that you should know about in order to have a holistic understanding of the stock.
Switching gears from Origin Energy, 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.
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