How Should Investors React To Platinum Investment Management's (ASX:PTM) CEO Pay?

Andrew Clifford became the CEO of Platinum Investment Management Limited (ASX:PTM) in 2018, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Platinum Investment Management

Comparing Platinum Investment Management Limited's CEO Compensation With the industry

Our data indicates that Platinum Investment Management Limited has a market capitalization of AU$2.4b, and total annual CEO compensation was reported as AU$651k for the year to June 2020. That's mostly flat as compared to the prior year's compensation. In particular, the salary of AU$450.0k, makes up a huge portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the industry with market capitalizations between AU$1.3b and AU$4.2b, we discovered that the median CEO total compensation of that group was AU$1.5m. In other words, Platinum Investment Management pays its CEO lower than the industry median. Moreover, Andrew Clifford also holds AU$154m worth of Platinum Investment Management stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. Our data reveals that Platinum Investment Management allocates salary more or less in line with the wider market. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Platinum Investment Management Limited's Growth

Over the last three years, Platinum Investment Management Limited has shrunk its earnings per share by 5.5% per year. In the last year, its revenue changed by just 0.2%.

Few shareholders would be pleased to read that EPS have declined. And the flat revenue hardly impresses. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Platinum Investment Management Limited Been A Good Investment?

Since shareholders would have lost about 37% over three years, some Platinum Investment Management Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we noted earlier, Platinum Investment Management pays its CEO lower than the norm for similar-sized companies belonging to the same industry. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 3 warning signs for Platinum Investment Management (1 is significant!) that you should be aware of before investing here.

Important note: Platinum Investment Management is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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