Some Shareholders May find It Hard To Increase Australian Ethical Investment Limited's (ASX:AEF) CEO Compensation This Year

Key Insights

• Australian Ethical Investment to hold its Annual General Meeting on 15th of November
• CEO John McMurdo's total compensation includes salary of AU$493.7k
• Total compensation is similar to the industry average
• Australian Ethical Investment's total shareholder return over the past three years was 2.9% while its EPS was down 12% over the past three years

The anaemic share price growth at Australian Ethical Investment Limited (ASX:AEF) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 15th of November. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. 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.

See our latest analysis for Australian Ethical Investment

Comparing Australian Ethical Investment Limited's CEO Compensation With The Industry

Our data indicates that Australian Ethical Investment Limited has a market capitalization of AU$510m, and total annual CEO compensation was reported as AU$1.1m for the year to June 2023. This means that the compensation hasn't changed much from last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$494k.

For comparison, other companies in the Australian Capital Markets industry with market capitalizations ranging between AU$311m and AU$1.2b had a median total CEO compensation of AU$1.1m. This suggests that Australian Ethical Investment remunerates its CEO largely in line with the industry average. Furthermore, John McMurdo directly owns AU$81k worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	AU$494k	AU$467k	43%
Other	AU$654k	AU$660k	57%
Total Compensation	AU$1.1m	AU$1.1m	100%

On an industry level, around 65% of total compensation represents salary and 35% is other remuneration. Australian Ethical Investment pays a modest slice of remuneration through salary, as compared 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.

Australian Ethical Investment Limited's Growth

Australian Ethical Investment Limited has reduced its earnings per share by 12% a year over the last three years. Its revenue is up 15% over the last year.

The decline in EPS is a bit concerning. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Australian Ethical Investment Limited Been A Good Investment?

Australian Ethical Investment Limited has not done too badly by shareholders, with a total return of 2.9%, over three years. It would be nice to see that metric improve in the future. 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...

The flat share price growth combined with the the fact that earnings have failed to grow makes us wonder whether the share price will have any further strong momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Australian Ethical Investment that you should be aware of before investing.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.