Shareholders May Be More Conservative With Pharmaxis Ltd's (ASX:PXS) CEO Compensation For Now
In the past three years, the share price of Pharmaxis Ltd (ASX:PXS) has struggled to grow and now shareholders are sitting on a loss. In addition, the company's per-share earnings growth is not looking good, despite growing revenues. Shareholders will have a chance to take their concerns to the board at the next AGM on 02 November 2021 and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's our take on why we think shareholders might be hesitant about approving a raise at the moment.
See our latest analysis for Pharmaxis
Comparing Pharmaxis Ltd's CEO Compensation With the industry
At the time of writing, our data shows that Pharmaxis Ltd has a market capitalization of AU$57m, and reported total annual CEO compensation of AU$683k for the year to June 2021. That's a notable increase of 22% on last year. We note that the salary portion, which stands at AU$443.9k constitutes the majority of total compensation received by the CEO.
In comparison with other companies in the industry with market capitalizations under AU$266m, the reported median total CEO compensation was AU$470k. Accordingly, our analysis reveals that Pharmaxis Ltd pays Gary Phillips north of the industry median. Furthermore, Gary Phillips directly owns AU$291k worth of shares in the company.
Component | 2021 | 2020 | Proportion (2021) |
Salary | AU$444k | AU$440k | 65% |
Other | AU$239k | AU$119k | 35% |
Total Compensation | AU$683k | AU$559k | 100% |
Talking in terms of the industry, salary represented approximately 59% of total compensation out of all the companies we analyzed, while other remuneration made up 41% of the pie. Although there is a difference in how total compensation is set, Pharmaxis more or less reflects the market in terms of setting the salary. 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 Pharmaxis Ltd's Growth Numbers
Over the last three years, Pharmaxis Ltd has shrunk its earnings per share by 3.1% per year. It achieved revenue growth of 87% over the last year.
The reduction in EPS, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Pharmaxis Ltd Been A Good Investment?
With a total shareholder return of -55% over three years, Pharmaxis Ltd shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.
In Summary...
The loss to shareholders over the past three years is certainly concerning and possibly has something to do with the fact that the company's earnings haven't grown. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
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. That's why we did some digging and identified 3 warning signs for Pharmaxis that investors should think about before committing capital to this stock.
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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