How Should Investors React To Finexia Financial Group's (ASX:FNX) CEO Pay?

Neil Sheather has been the CEO of Finexia Financial Group Limited (ASX:FNX) since 2014, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Finexia Financial Group.

See our latest analysis for Finexia Financial Group

How Does Total Compensation For Neil Sheather Compare With Other Companies In The Industry?

According to our data, Finexia Financial Group Limited has a market capitalization of AU$13m, and paid its CEO total annual compensation worth AU$231k over the year to June 2020. We note that's a decrease of 14% compared to last year. Notably, the salary which is AU$227.6k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below AU$257m, reported a median total CEO compensation of AU$443k. In other words, Finexia Financial Group pays its CEO lower than the industry median. What's more, Neil Sheather holds AU$532k worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Investors will find it interesting that Finexia Financial Group pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Finexia Financial Group Limited's Growth

Over the last three years, Finexia Financial Group Limited has shrunk its earnings per share by 56% per year. In the last year, its revenue is up 5.5%.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Finexia Financial Group Limited Been A Good Investment?

Boasting a total shareholder return of 295% over three years, Finexia Financial Group Limited has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

Finexia Financial Group pays its CEO a majority of compensation through a salary. As we noted earlier, Finexia Financial Group pays its CEO lower than the norm for similar-sized companies belonging to the same industry. And although the company is suffering from declining EPS growth over the past three years, shareholder returns remain strong. We would like to see EPS growth, but in our view CEO compensation is modest.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 4 warning signs for Finexia Financial Group (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the 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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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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