This article will reflect on the compensation paid to Kevin Pallas who has served as CEO of Engenco Limited (ASX:EGN) since 2015. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Check out our latest analysis for Engenco
How Does Total Compensation For Kevin Pallas Compare With Other Companies In The Industry?
According to our data, Engenco Limited has a market capitalization of AU$188m, and paid its CEO total annual compensation worth AU$658k over the year to June 2020. Notably, that's an increase of 28% over the year before. Notably, the salary which is AU$451.2k, represents most of the total compensation being paid.
On comparing similar-sized companies in the industry with market capitalizations below AU$259m, we found that the median total CEO compensation was AU$415k. Accordingly, our analysis reveals that Engenco Limited pays Kevin Pallas north of the industry median.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | AU$451k | AU$411k | 69% |
| Other | AU$207k | AU$102k | 31% |
| Total Compensation | AU$658k | AU$513k | 100% |
On an industry level, around 80% of total compensation represents salary and 20% is other remuneration. In Engenco's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Engenco Limited's Growth
Over the past three years, Engenco Limited has seen its earnings per share (EPS) grow by 16% per year. In the last year, its revenue is up 3.2%.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. 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 Engenco Limited Been A Good Investment?
We think that the total shareholder return of 34%, over three years, would leave most Engenco Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary...
As we touched on above, Engenco Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Importantly though, EPS growth and shareholder returns are very impressive over the last three years. So, in acknowledgment of the overall excellent performance, we believe CEO compensation is appropriate. The pleasing shareholder returns are the cherry on top. We wouldn't be wrong in saying that shareholders feel that Kevin's performance creates value for the company.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Engenco that you should be aware of before investing.
Switching gears from Engenco, 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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Access Free AnalysisThis 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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About ASX:EGN
Moderate and good value.
