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Paul Arnold became the CEO of Energy Resources of Australia Ltd (ASX:ERA) in 2017, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Energy Resources of Australia.
Comparing Energy Resources of Australia Ltd's CEO Compensation With the industry
At the time of writing, our data shows that Energy Resources of Australia Ltd has a market capitalization of AU$591m, and reported total annual CEO compensation of AU$910k for the year to December 2019. That's just a smallish increase of 3.9% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$385k.
On comparing similar companies from the same industry with market caps ranging from AU$287m to AU$1.1b, we found that the median CEO total compensation was AU$1.3m. That is to say, Paul Arnold is paid under the industry median.
Talking in terms of the industry, salary represented approximately 73% of total compensation out of all the companies we analyzed, while other remuneration made up 27% of the pie. Energy Resources of Australia sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Energy Resources of Australia Ltd's Growth Numbers
Over the last three years, Energy Resources of Australia Ltd has shrunk its earnings per share by 12% per year. It achieved revenue growth of 9.4% over the last year.
Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Energy Resources of Australia Ltd Been A Good Investment?
Since shareholders would have lost about 62% over three years, some Energy Resources of Australia Ltd investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we touched on above, Energy Resources of Australia Ltd is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Earnings growth has failed to impress us, and the same can be said about shareholder returns. It's tough to say that Paul is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Energy Resources of Australia that investors should think about before committing capital to this stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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