How Should Investors React To Bharat Petroleum Corporation Limited’s (NSE:BPCL) CEO Pay?

D. Rajkumar has been the CEO of Bharat Petroleum Corporation Limited (NSE:BPCL) since 2016. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Bharat Petroleum

How Does D. Rajkumar’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Bharat Petroleum Corporation Limited has a market cap of ₹919b, and reported total annual CEO compensation of ₹11m for the year to March 2019. We think total compensation is more important but we note that the CEO salary is lower, at ₹2.9m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over ₹591b and the median CEO total compensation was ₹79m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).

A first glance this seems like a real positive for shareholders, since D. Rajkumar is paid less than the average total compensation paid by other large companies. While this is a good thing, you’ll need to understand the business better before you can form an opinion.

You can see a visual representation of the CEO compensation at Bharat Petroleum, below.

NSEI:BPCL CEO Compensation, March 12th 2020
NSEI:BPCL CEO Compensation, March 12th 2020

Is Bharat Petroleum Corporation Limited Growing?

Bharat Petroleum Corporation Limited has reduced its earnings per share by an average of 9.5% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is up 2.5%.

Few shareholders would be pleased to read that earnings per share are lower over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Bharat Petroleum Corporation Limited Been A Good Investment?

With a total shareholder return of 8.3% over three years, Bharat Petroleum Corporation Limited has done okay by shareholders. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

It appears that Bharat Petroleum Corporation Limited remunerates its CEO below most large companies.

D. Rajkumar is remunerated more modestly than is a normal at most large companies. But the company lacks earnings per share growth, and returns to shareholders are less than stellar. So while shareholders shouldn’t be overly concerned about CEO compensation, we suspect most would prefer see improved performance, before increasing pay. Looking into other areas, we’ve picked out 2 warning signs for Bharat Petroleum that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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