How Should Investors React To Lithium Australia NL’s (ASX:LIT) CEO Pay?

Adrian Griffin has been the CEO of Lithium Australia NL (ASX:LIT) since 2011. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Lithium Australia

How Does Adrian Griffin’s Compensation Compare With Similar Sized Companies?

Our data indicates that Lithium Australia NL is worth AU$33m, and total annual CEO compensation was reported as AU$635k for the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$352k. We took a group of companies with market capitalizations below AU$305m, and calculated the median CEO total compensation to be AU$386k.

As you can see, Adrian Griffin is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Lithium Australia NL is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see a visual representation of the CEO compensation at Lithium Australia, below.

ASX:LIT CEO Compensation, February 28th 2020
ASX:LIT CEO Compensation, February 28th 2020

Is Lithium Australia NL Growing?

Lithium Australia NL has reduced its earnings per share by an average of 33% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 109% over the last year.

As investors, we are a bit wary of companies that have lower earnings per share, over three years. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can’t form a strong opinion about business performance yet; but it’s one worth watching. We don’t have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Lithium Australia NL Been A Good Investment?

Given the total loss of 63% over three years, many shareholders in Lithium Australia NL are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We examined the amount Lithium Australia NL pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Shareholders may wish to consider further research. Although we don’t think the CEO pay is too high, it is probably more on the generous side of things. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Lithium Australia.

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.

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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