We Think Shareholders Are Less Likely To Approve A Pay Rise For Australian Finance Group Limited's (ASX:AFG) CEO For Now

In the past three years, shareholders of Australian Finance Group Limited (ASX:AFG) have seen a loss on their investment. Per share earnings growth is also poor, despite revenues growing. Shareholders will have a chance to take their concerns to the board at the next AGM on 25 November 2022 and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's our take on why we think shareholders might be hesitant about approving a raise at the moment.

Check out the opportunities and risks within the AU Mortgage industry.

Comparing Australian Finance Group Limited's CEO Compensation With The Industry

Our data indicates that Australian Finance Group Limited has a market capitalization of AU$499m, and total annual CEO compensation was reported as AU$1.5m for the year to June 2022. Notably, that's an increase of 9.2% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$577k.

In comparison with other companies in the industry with market capitalizations ranging from AU$301m to AU$1.2b, the reported median CEO total compensation was AU$2.0m. So it looks like Australian Finance Group compensates David Bailey in line with the median for the industry. Moreover, David Bailey also holds AU$2.9m 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.

Component	2022	2021	Proportion (2022)
Salary	AU$577k	AU$551k	38%
Other	AU$935k	AU$835k	62%
Total Compensation	AU$1.5m	AU$1.4m	100%

Talking in terms of the industry, salary represented approximately 54% of total compensation out of all the companies we analyzed, while other remuneration made up 46% of the pie. In Australian Finance Group's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Australian Finance Group Limited's Growth Numbers

Australian Finance Group Limited has reduced its earnings per share by 2.3% a year over the last three years. Its revenue is up 24% over the last year.

Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Australian Finance Group Limited Been A Good Investment?

Given the total shareholder loss of 12% over three years, many shareholders in Australian Finance Group Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The company's earnings haven't grown and possibly because of that, the stock has performed poorly, resulting in a loss for the company's shareholders. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for Australian Finance Group that investors should be aware of in a dynamic business environment.

Important note: Australian Finance Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.