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Shareholders Will Probably Hold Off On Increasing Anglo American plc's (LON:AAL) CEO Compensation For The Time Being

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The share price of Anglo American plc (LON:AAL) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 05 May 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Anglo American

Comparing Anglo American plc's CEO Compensation With the industry

At the time of writing, our data shows that Anglo American plc has a market capitalization of UK£39b, and reported total annual CEO compensation of US$11m for the year to December 2020. We note that's a decrease of 25% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.9m.

In comparison with other companies in the industry with market capitalizations over UK£5.7b , the reported median total CEO compensation was US$3.3m. Hence, we can conclude that Mark Cutifani is remunerated higher than the industry median. Furthermore, Mark Cutifani directly owns UK£36m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

US$1.9m

US$1.8m

18%

Other

US$8.8m

US$12m

82%

Total Compensation

US$11m

US$14m

100%

Talking in terms of the industry, salary represented approximately 64% of total compensation out of all the companies we analyzed, while other remuneration made up 36% of the pie. Anglo American pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
ceo-compensation

Anglo American plc's Growth

Over the last three years, Anglo American plc has shrunk its earnings per share by 12% per year. Its revenue is up 3.5% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Anglo American plc Been A Good Investment?

Boasting a total shareholder return of 105% over three years, Anglo American plc 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...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 3 warning signs for Anglo American that investors should look into moving forward.

Switching gears from Anglo American, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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 (at) simplywallst.com.

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