We Think Shareholders Are Less Likely To Approve A Large Pay Rise For DroneShield Limited's (ASX:DRO) CEO For Now

In the past three years, the share price of DroneShield Limited (ASX:DRO) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 28 April 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

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$72m, and paid its CEO total annual compensation worth AU$1.2m over the year to December 2020. That's a fairly small increase of 7.9% over the previous year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$317k.

On comparing similar-sized companies in the industry with market capitalizations below AU$259m, we found that the median total CEO compensation was AU$640k. Hence, we can conclude that Oleg Vornik is remunerated higher than the industry median. Moreover, Oleg Vornik also holds AU$743k worth of DroneShield stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	AU$317k	AU$303k	27%
Other	AU$871k	AU$798k	73%
Total Compensation	AU$1.2m	AU$1.1m	100%

Talking in terms of the industry, salary represented approximately 55% of total compensation out of all the companies we analyzed, while other remuneration made up 45% of the pie. In DroneShield's case, non-salary compensation represents a greater slice of total remuneration, 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 DroneShield Limited's Growth Numbers

DroneShield Limited has seen its earnings per share (EPS) increase by 19% a year over the past three years. In the last year, its revenue is up 58%.

This demonstrates that the company has been improving recently and is good news for the shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has DroneShield Limited Been A Good Investment?

Given the total shareholder loss of 17% over three years, many shareholders in DroneShield 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...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 4 warning signs (and 2 which are a bit unpleasant) in DroneShield we think you should know about.

Switching gears from DroneShield, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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