Andrew Brown has been the CEO of ARB Corporation Limited (ASX:ARB) since 2012. 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Andrew Brown’s Compensation Compare With Similar Sized Companies?
Our data indicates that ARB Corporation Limited is worth AU$1.4b, and total annual CEO compensation is AU$391k. (This figure is for the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at AU$332k. When we examined a selection of companies with market caps ranging from AU$557m to AU$2.2b, we found the median CEO total compensation was AU$1.4m.
A first glance this seems like a real positive for shareholders, since Andrew Brown is paid less than the average total compensation paid by similar sized companies. However, before we heap on the praise, we should delve deeper to understand business performance.
The graphic below shows how CEO compensation at ARB has changed from year to year.
Is ARB Corporation Limited Growing?
Over the last three years ARB Corporation Limited has grown its earnings per share (EPS) by an average of 4.5% per year (using a line of best fit). Its revenue is up 8.7% over last year.
I would argue that the improvement in revenue isn’t particularly impressive, but the modest improvement in EPS is good. Considering these factors I’d say performance has been pretty decent, though not amazing. It could be important to check this free visual depiction of what analysts expect for the future.
Has ARB Corporation Limited Been A Good Investment?
With a total shareholder return of 18% over three years, ARB Corporation Limited shareholders would, in general, be reasonably content. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.
It appears that ARB Corporation Limited remunerates its CEO below most similar sized companies.
It’s well worth noting that while Andrew Brown is paid less than most company leaders (at companies of similar size), share price performance has been somewhat uninspiring. So shareholders may not be elated, but they shouldn’t be worried about the CEO compensation, either. Shareholders may want to check for free if ARB insiders are buying or selling shares.
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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