Performance at Downer EDI Limited (ASX:DOW) has been reasonably good and CEO Grant Fenn has done a decent job of steering the company in the right direction. This is something shareholders will keep in mind as they cast their votes on company resolutions such as executive remuneration in the upcoming AGM on 04 November 2021. We present our case of why we think CEO compensation looks fair.
Comparing Downer EDI Limited's CEO Compensation With the industry
According to our data, Downer EDI Limited has a market capitalization of AU$4.4b, and paid its CEO total annual compensation worth AU$3.3m over the year to June 2021. That's a fairly small increase of 7.8% over the previous year. Notably, the salary which is AU$1.72m, represents a considerable chunk of the total compensation being paid.
On comparing similar companies from the same industry with market caps ranging from AU$2.6b to AU$8.5b, we found that the median CEO total compensation was AU$4.0m. From this we gather that Grant Fenn is paid around the median for CEOs in the industry. What's more, Grant Fenn holds AU$13m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 57% of total compensation represents salary, while the remainder of 43% is other remuneration. Our data reveals that Downer EDI allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Downer EDI Limited's Growth
Downer EDI Limited has seen its earnings per share (EPS) increase by 33% a year over the past three years. In the last year, its revenue is down 9.0%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Downer EDI Limited Been A Good Investment?
Downer EDI Limited has not done too badly by shareholders, with a total return of 5.8%, over three years. It would be nice to see that metric improve in the future. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.
The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. In saying that, any proposed increase to CEO compensation will still be assessed on how reasonable it is based on performance and industry benchmarks.
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 a bit concerning) in Downer EDI we think you should know about.
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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