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Shareholders Will Probably Not Have Any Issues With Orocobre Limited's (ASX:ORE) CEO Compensation

Orocobre Limited (ASX:ORE) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 30 November 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. 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 Orocobre

Comparing Orocobre Limited's CEO Compensation With the industry

Our data indicates that Orocobre Limited has a market capitalization of AU$6.2b, and total annual CEO compensation was reported as US$1.2m for the year to June 2021. Notably, that's a decrease of 23% over the year before. In particular, the salary of US$700.0k, makes up a fairly large portion of the total compensation being paid to the CEO.

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On comparing similar companies from the same industry with market caps ranging from AU$2.8b to AU$8.8b, we found that the median CEO total compensation was US$1.6m. So it looks like Orocobre compensates Martin de Solay in line with the median for the industry. What's more, Martin de Solay holds AU$3.3m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2021

2020

Proportion (2021)

Salary

US$700k

US$700k

59%

Other

US$490k

US$845k

41%

Total Compensation

US$1.2m

US$1.5m

100%

Speaking on an industry level, nearly 59% of total compensation represents salary, while the remainder of 41% is other remuneration. There isn't a significant difference between Orocobre and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ceo-compensation

A Look at Orocobre Limited's Growth Numbers

Over the last three years, Orocobre Limited has shrunk its earnings per share by 91% per year. It achieved revenue growth of 10.0% over the last year.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 Orocobre Limited Been A Good Investment?

Most shareholders would probably be pleased with Orocobre Limited for providing a total return of 137% over three years. 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...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Orocobre (1 is a bit concerning!) that you should be aware of before investing here.

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.

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