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Why Meridian Energy's (NZSE:MEL) CEO Pay Matters

Simply Wall St
·4 mins read

Neal Barclay became the CEO of Meridian Energy Limited (NZSE:MEL) in 2018, 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 Meridian Energy.

View our latest analysis for Meridian Energy

Comparing Meridian Energy Limited's CEO Compensation With the industry

At the time of writing, our data shows that Meridian Energy Limited has a market capitalization of NZ$14b, and reported total annual CEO compensation of NZ$2.0m for the year to June 2020. Notably, that's an increase of 20% over the year before. We note that the salary portion, which stands at NZ$1.07m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations ranging from NZ$6.1b to NZ$18b, the reported median CEO total compensation was NZ$326k. This suggests that Neal Barclay is paid more than the median for the industry. Furthermore, Neal Barclay directly owns NZ$2.5m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

NZ$1.1m

NZ$974k

53%

Other

NZ$969k

NZ$721k

47%

Total Compensation

NZ$2.0m

NZ$1.7m

100%

On an industry level, around 64% of total compensation represents salary and 36% is other remuneration. Meridian Energy sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

ceo-compensation
ceo-compensation

Meridian Energy Limited's Growth

Over the last three years, Meridian Energy Limited has shrunk its earnings per share by 4.2% per year. In the last year, its revenue is down 2.5%.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Meridian Energy Limited Been A Good Investment?

Boasting a total shareholder return of 131% over three years, Meridian Energy Limited has done well by shareholders. 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.

In Summary...

As previously discussed, Neal is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. We feel that EPS have been a bit disappointing, but it's nice to see positive shareholder returns over the last three years. Considering positive investor returns, it would be bold of us to criticize CEO compensation, but shareholders might want to see healthier EPS growth before a raise is given out.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which is significant) in Meridian Energy we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.