Here's Why We Think Australian Finance Group Limited's (ASX:AFG) CEO Compensation Looks Fair for the time being

Performance at Australian Finance Group Limited (ASX:AFG) has been reasonably good and CEO David Bailey has done a decent job of steering the company in the right direction. As shareholders go into the upcoming AGM on 26 November 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. Based on our analysis of the data below, we think CEO compensation seems reasonable for now.

See our latest analysis for Australian Finance Group

How Does Total Compensation For David Bailey Compare With Other Companies In The Industry?

According to our data, Australian Finance Group Limited has a market capitalization of AU$651m, and paid its CEO total annual compensation worth AU$1.4m over the year to June 2021. Notably, that's an increase of 17% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$551k.

On comparing similar companies from the same industry with market caps ranging from AU$275m to AU$1.1b, we found that the median CEO total compensation was AU$1.4m. This suggests that Australian Finance Group remunerates its CEO largely in line with the industry average. Furthermore, David Bailey directly owns AU$3.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	AU$551k	AU$551k	40%
Other	AU$835k	AU$629k	60%
Total Compensation	AU$1.4m	AU$1.2m	100%

On an industry level, around 55% of total compensation represents salary and 45% is other remuneration. It's interesting to note that Australian Finance Group allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Australian Finance Group Limited's Growth Numbers

Australian Finance Group Limited has seen its earnings per share (EPS) increase by 7.1% a year over the past three years. It achieved revenue growth of 11% over the last year.

We would argue that the modest growth in revenue is a notable positive. And, while modest, the EPS growth is noticeable. So while performance isn't amazing, we think it really does seem quite respectable. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Australian Finance Group Limited Been A Good Investment?

We think that the total shareholder return of 127%, over three years, would leave most Australian Finance Group Limited shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. In saying that, any proposed increase to CEO compensation will still be assessed on how reasonable it is based on performance and industry benchmarks.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 2 warning signs for Australian Finance Group that investors should look into moving forward.

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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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