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Most Shareholders Will Probably Find That The CEO Compensation For South32 Limited (ASX:S32) Is Reasonable

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  • SHTLF
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Despite South32 Limited's (ASX:S32) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 28 October 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for South32

Comparing South32 Limited's CEO Compensation With the industry

Our data indicates that South32 Limited has a market capitalization of AU$18b, and total annual CEO compensation was reported as US$4.8m for the year to June 2021. That's slightly lower by 4.8% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.

For comparison, other companies in the industry with market capitalizations above AU$11b, reported a median total CEO compensation of US$4.8m. So it looks like South32 compensates Graham Kerr in line with the median for the industry. Furthermore, Graham Kerr directly owns AU$15m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2021

2020

Proportion (2021)

Salary

US$1.3m

US$1.2m

28%

Other

US$3.5m

US$3.9m

72%

Total Compensation

US$4.8m

US$5.0m

100%

On an industry level, around 63% of total compensation represents salary and 37% is other remuneration. In South32's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

South32 Limited's Growth

South32 Limited has reduced its earnings per share by 51% a year over the last three years. In the last year, its revenue is up 8.7%.

Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has South32 Limited Been A Good Investment?

South32 Limited has served shareholders reasonably well, with a total return of 20% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 3 warning signs for South32 that investors should be aware of in a dynamic business environment.

Important note: South32 is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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.

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

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