We think the compensation for the CEO of Downer EDI Limited (ASX: DOW) looks about right
Performances at Limited EDI Downer (ASX: DOW) has been reasonably good and CEO Grant Fenn has done a decent job of leading the company in the right direction. In light of this performance, CEO compensation is unlikely to be the primary focus of shareholders at the AGM on November 4, 2021. We present our case as to why we believe CEO compensation appears just.
Check out our latest review for EDI Downer
How does Grant Fenn’s total compensation compare to other companies in the industry?
According to our data, Downer EDI Limited has a market capitalization of AU $ 4.4 billion and paid its CEO a total annual compensation of AU $ 3.3 million until June 2021. This is a rather small increase of 7.8% compared to the previous year. We note that the salary of A $ 1.72 million represents a significant portion of the total compensation received by the CEO.
Looking at similar-sized companies in the industry with market caps ranging from A $ 2.6 billion to A $ 8.5 billion, we found that the median total CEO compensation for this group was A $ 4.0 million. From this, we infer that Grant Fenn is paid around the median of industry CEOs. Additionally, Grant Fenn owns A $ 13 million in shares of the company in his own name, indicating that they have a lot of skin in the game.
|Making up||2021||2020||Proportion (2021)|
|Salary||1.7 million Australian dollars||1.5 million Australian dollars||52%|
|Other||1.6 million Australian dollars||1.6 million Australian dollars||48%|
|Total compensation||AU $ 3.3 million||AU $ 3.1 million||100%|
At the industry level, approximately 57% of total compensation is salary and 43% is other compensation. Downer EDI largely reflects the industry average when it comes to the share of a salary in total compensation. If salary dominates total compensation, this suggests that CEO compensation leans less towards the variable part, which is generally performance-related.
A look at the growth figures of Downer EDI Limited
Downer EDI Limited has seen its earnings per share (EPS) increase by 33% per year over the past three years. Its turnover is down 9.0% compared to the previous year.
Shareholders would be happy to know that the company has improved over the past few years. It is always a difficult situation when the income does not increase, but ultimately the profits are higher. Going forward, you might want to check out this free visual report at analyst forecasts for the future profits of the company.
Has Downer EDI Limited been a good investment?
Downer EDI Limited did not do too badly by shareholders, with a total return of 5.8%, over three years. It would be nice to see this metric improve in the future. As a result, a proposal to increase CEO compensation without seeing improved shareholder returns might not be welcomed by most shareholders.
Given that the overall performance of the company has been reasonable, the CEO compensation policy might not be the focus of shareholders at the next AGM. Despite the satisfactory results, we still believe that any proposal to increase CEO compensation will be considered on a case-by-case basis and linked to performance results.
CEO compensation is just one of the many factors that should be taken into account when reviewing company performance. That’s why we did our research and identified 2 warning signs for Downer EDI (1 of which should not be ignored!) that you need to know in order to have a holistic understanding of the stock.
Switch gears from Downer EDI, if you are looking for a crisp balance sheet and premium returns, this free List of high yield, low leverage companies is a great place to look.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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