Stock Analysis

Most Shareholders Will Probably Agree With Westpac Banking Corporation's (ASX:WBC) CEO Compensation

Source: Shutterstock

The share price of Westpac Banking Corporation (ASX:WBC) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 13 December 2022. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

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

Comparing Westpac Banking Corporation's CEO Compensation With The Industry

According to our data, Westpac Banking Corporation has a market capitalization of AU$83b, and paid its CEO total annual compensation worth AU$5.0m over the year to September 2022. Notably, that's an increase of 19% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$2.4m.

On comparing similar companies in the industry with market capitalizations above AU$12b, we found that the median total CEO compensation was AU$4.0m. From this we gather that Peter King is paid around the median for CEOs in the industry. Furthermore, Peter King directly owns AU$4.1m worth of shares in the company.

Component20222021Proportion (2022)
Salary AU$2.4m AU$2.4m 48%
Other AU$2.6m AU$1.8m 52%
Total CompensationAU$5.0m AU$4.2m100%

On an industry level, roughly 48% of total compensation represents salary and 52% is other remuneration. Although there is a difference in how total compensation is set, Westpac Banking more or less reflects the market in terms of setting the salary. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ASX:WBC CEO Compensation December 7th 2022

A Look at Westpac Banking Corporation's Growth Numbers

Westpac Banking Corporation has reduced its earnings per share by 6.1% a year over the last three years. It saw its revenue drop 12% over the last year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Westpac Banking Corporation Been A Good Investment?

With a total shareholder return of 9.6% over three years, Westpac Banking Corporation has done okay by shareholders, but there's always room for improvement. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. 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 did our research and spotted 1 warning sign for Westpac Banking 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.

Valuation is complex, but we're helping make it simple.

Find out whether Westpac Banking is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis