How Should Investors React To DroneShield's (ASX:DRO) CEO Pay?

By
Simply Wall St
Published
November 13, 2020

Oleg Vornik has been the CEO of DroneShield Limited (ASX:DRO) since 2017, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for DroneShield

How Does Total Compensation For Oleg Vornik Compare With Other Companies In The Industry?

According to our data, DroneShield Limited has a market capitalization of AU$74m, and paid its CEO total annual compensation worth AU$1.1m over the year to December 2019. Notably, that's an increase of 73% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$303k.

In comparison with other companies in the industry with market capitalizations under AU$275m, the reported median total CEO compensation was AU$638k. This suggests that Oleg Vornik is paid more than the median for the industry. Furthermore, Oleg Vornik directly owns AU$803k worth of shares in the company, implying that they are deeply invested in the company's success.

Component20192018Proportion (2019)
Salary AU$303k AU$226k 28%
Other AU$798k AU$411k 72%
Total CompensationAU$1.1m AU$637k100%

Talking in terms of the industry, salary represented approximately 53% of total compensation out of all the companies we analyzed, while other remuneration made up 47% of the pie. In DroneShield'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.

ASX:DRO CEO Compensation November 13th 2020

A Look at DroneShield Limited's Growth Numbers

DroneShield Limited's earnings per share (EPS) grew 11% per year over the last three years. Its revenue is up 44% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has DroneShield Limited Been A Good Investment?

Since shareholders would have lost about 2.5% over three years, some DroneShield Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As previously discussed, Oleg is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. However, we must not forget that the EPS growth has been very strong, but shareholder returns — over the same period — have been disappointing. Considering overall performance, we can't say Oleg is underpaid, in fact compensation is definitely on the higher side.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 5 warning signs (and 2 which are a bit concerning) in DroneShield we think you should know about.

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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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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