We Think Some Shareholders May Hesitate To Increase Shriro Holdings Limited's (ASX:SHM) CEO Compensation

Shriro Holdings Limited (ASX:SHM) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 15 December 2021. 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 what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Shriro Holdings

Comparing Shriro Holdings Limited's CEO Compensation With the industry

Our data indicates that Shriro Holdings Limited has a market capitalization of AU$99m, and total annual CEO compensation was reported as AU$1.2m for the year to December 2020. Notably, that's an increase of 60% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$587k.

For comparison, other companies in the industry with market capitalizations below AU$281m, reported a median total CEO compensation of AU$473k. Accordingly, our analysis reveals that Shriro Holdings Limited pays Tim Hargreaves north of the industry median. What's more, Tim Hargreaves holds AU$289k worth of shares in the company in their own name.

Component	2020	2019	Proportion (2020)
Salary	AU$587k	AU$575k	48%
Other	AU$632k	AU$188k	52%
Total Compensation	AU$1.2m	AU$763k	100%

On an industry level, around 48% of total compensation represents salary and 52% is other remuneration. There isn't a significant difference between Shriro Holdings and the broader market, in terms of salary allocation in the overall compensation package. 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 Shriro Holdings Limited's Growth Numbers

Shriro Holdings Limited has reduced its earnings per share by 1.8% a year over the last three years. Its revenue is up 10% over the last year.

The lack of EPS growth is certainly uninspiring. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Shriro Holdings Limited Been A Good Investment?

Most shareholders would probably be pleased with Shriro Holdings Limited for providing a total return of 142% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for Shriro Holdings (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Shriro Holdings, 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. 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.