Does Australian Finance Group's (ASX:AFG) CEO Salary Compare Well With Industry Peers?

David Bailey became the CEO of Australian Finance Group Limited (ASX:AFG) in 2017, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Australian Finance Group.

See our latest analysis for Australian Finance Group

Comparing Australian Finance Group Limited's CEO Compensation With the industry

According to our data, Australian Finance Group Limited has a market capitalization of AU$725m, and paid its CEO total annual compensation worth AU$1.2m over the year to June 2020. Notably, that's an increase of 14% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$551k.

In comparison with other companies in the industry with market capitalizations ranging from AU$258m to AU$1.0b, the reported median CEO total compensation was AU$1.2m. This suggests that Australian Finance Group remunerates its CEO largely in line with the industry average. Moreover, David Bailey also holds AU$3.3m worth of Australian Finance Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 78% of total compensation represents salary and 22% is other remuneration. In Australian Finance Group's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Australian Finance Group Limited's Growth Numbers

Australian Finance Group Limited has reduced its earnings per share by 1.6% a year over the last three years. Its revenue is up 6.1% over the last year.

Its a bit disappointing to see that the company has failed to grow its EPS. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Australian Finance Group Limited Been A Good Investment?

Most shareholders would probably be pleased with Australian Finance Group Limited for providing a total return of 102% 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.

To Conclude...

As we touched on above, Australian Finance Group Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look good when you see that EPS growth over the last three years has been negative. On the other hand, shareholder returns are showing positive trends over the same time frame. We do not think CEO compensation is a problem, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 3 warning signs for Australian Finance Group that investors should think about before committing capital to this stock.

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

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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.
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