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Is Whitehaven Coal Limited's (ASX:WHC) CEO Pay Fair?

Simply Wall St

Paul Flynn became the CEO of Whitehaven Coal Limited (ASX:WHC) in 2013. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Whitehaven Coal

How Does Paul Flynn's Compensation Compare With Similar Sized Companies?

According to our data, Whitehaven Coal Limited has a market capitalization of AU$1.8b, and paid its CEO total annual compensation worth AU$2.9m over the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$1.5m. We looked at a group of companies with market capitalizations from AU$605m to AU$2.4b, and the median CEO total compensation was AU$1.5m.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Whitehaven Coal stands. On an industry level, roughly 71% of total compensation represents salary and 29% is other remuneration. Our data reveals that Whitehaven Coal allocates salary in line with the wider market.

Thus we can conclude that Paul Flynn receives more in total compensation than the median of a group of companies in the same market, and of similar size to Whitehaven Coal Limited. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. The graphic below shows how CEO compensation at Whitehaven Coal has changed from year to year.

ASX:WHC CEO Compensation May 22nd 2020

Is Whitehaven Coal Limited Growing?

Whitehaven Coal Limited has seen earnings per share (EPS) move positively by an average of 9.7% a year, over the last three years (using a line of best fit). In the last year, its revenue is down 12%.

I would prefer it if there was revenue growth, but it is good to see EPS growth. It's hard to reach a conclusion about business performance right now. This may be one to watch. It could be important to check this free visual depiction of what analysts expect for the future.

Has Whitehaven Coal Limited Been A Good Investment?

Since shareholders would have lost about 12% over three years, some Whitehaven Coal Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared the total CEO remuneration paid by Whitehaven Coal Limited, and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

The growth in the business has been uninspiring, but the shareholder returns have arguably been worse, over the last three years. Although we'd stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. Moving away from CEO compensation for the moment, we've identified 3 warning signs for Whitehaven Coal that you should be aware of before investing.

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.

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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. Thank you for reading.