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We have been pretty impressed with the performance at Metcash Limited (ASX:MTS) recently and CEO Jeff Adams deserves a mention for their role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 01 September 2021. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.
How Does Total Compensation For Jeff Adams Compare With Other Companies In The Industry?
Our data indicates that Metcash Limited has a market capitalization of AU$3.9b, and total annual CEO compensation was reported as AU$5.6m for the year to April 2021. We note that's an increase of 76% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$1.8m.
On examining similar-sized companies in the industry with market capitalizations between AU$2.8b and AU$8.8b, we discovered that the median CEO total compensation of that group was AU$4.6m. From this we gather that Jeff Adams is paid around the median for CEOs in the industry. Moreover, Jeff Adams also holds AU$3.6m worth of Metcash stock directly under their own name.
On an industry level, roughly 32% of total compensation represents salary and 68% is other remuneration. Although there is a difference in how total compensation is set, Metcash more or less reflects the market in terms of setting the salary. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at Metcash Limited's Growth Numbers
Over the past three years, Metcash Limited has seen its earnings per share (EPS) grow by 87% per year. Its revenue is up 9.9% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. 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 Metcash Limited Been A Good Investment?
Most shareholders would probably be pleased with Metcash Limited for providing a total return of 62% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
Some shareholders will probably be more lenient on CEO compensation in the upcoming AGM given the pleasing performance of the company recently. However, despite the strong growth in earnings and share price growth, the focus for shareholders would be how the company plans to steer the company towards sustainable profitability in the near future.
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 1 warning sign for Metcash 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. 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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