Stock Analysis

Here's Why Shareholders May Consider Paying ASX Limited's (ASX:ASX) CEO A Little More

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ASX:ASX
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Shareholders will probably not be disappointed by the robust results at ASX Limited (ASX:ASX) recently and they will be keeping this in mind as they go into the AGM on 29 September 2021. This would also be a chance for them to hear the board review the financial results, discuss future company strategy to further improve the business and vote on any resolutions such as executive remuneration. Here is our take on why we think CEO compensation is fair and may even warrant a raise.

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Comparing ASX Limited's CEO Compensation With the industry

At the time of writing, our data shows that ASX Limited has a market capitalization of AU$16b, and reported total annual CEO compensation of AU$4.3m for the year to June 2021. Notably, that's an increase of 19% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$2.0m.

On comparing similar companies in the industry with market capitalizations above AU$11b, we found that the median total CEO compensation was AU$10m. This suggests that Dominic Stevens is paid below the industry median. What's more, Dominic Stevens holds AU$5.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary AU$2.0m AU$2.0m 46%
Other AU$2.3m AU$1.6m 54%
Total CompensationAU$4.3m AU$3.6m100%

Talking in terms of the industry, salary represented approximately 61% of total compensation out of all the companies we analyzed, while other remuneration made up 39% of the pie. In ASX'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.

ceo-compensation
ASX:ASX CEO Compensation September 22nd 2021

ASX Limited's Growth

Over the past three years, ASX Limited has seen its earnings per share (EPS) grow by 2.6% per year. Its revenue is down 7.1% over the previous year.

We would argue that the lack of revenue growth in the last year is less than ideal, but the modest EPS growth gives us some relief. It's hard to reach a conclusion about business performance right now. This may be one to watch. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has ASX Limited Been A Good Investment?

We think that the total shareholder return of 45%, over three years, would leave most ASX Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Overall, the company hasn't done too poorly performance-wise, but we would like to see some improvement. If it continues on the same road, shareholders might feel even more confident about their investment, and have little to no objections concerning CEO pay. Rather, investors would more likely want to engage on discussions related to key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for ASX that investors should think about before committing capital to this stock.

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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