How Should Investors Feel About Zip Co's (ASX:Z1P) CEO Remuneration?

Larry Diamond is the CEO of Zip Co Limited (ASX:Z1P), and in this article, we analyze the executive's compensation package 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 Zip Co.

Check out our latest analysis for Zip Co

How Does Total Compensation For Larry Diamond Compare With Other Companies In The Industry?

At the time of writing, our data shows that Zip Co Limited has a market capitalization of AU$3.1b, and reported total annual CEO compensation of AU$820k for the year to June 2020. Notably, that's an increase of 39% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$401k.

On examining similar-sized companies in the industry with market capitalizations between AU$1.4b and AU$4.4b, we discovered that the median CEO total compensation of that group was AU$1.3m. That is to say, Larry Diamond is paid under the industry median. Furthermore, Larry Diamond directly owns AU$334m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 42% of total compensation represents salary and 58% is other remuneration. Zip Co pays out 49% of remuneration in the form of a salary, significantly higher than the industry average. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Zip Co Limited's Growth

Zip Co Limited's earnings per share (EPS) grew 16% per year over the last three years. It achieved revenue growth of 91% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Zip Co Limited Been A Good Investment?

We think that the total shareholder return of 790%, over three years, would leave most Zip Co Limited shareholders smiling. 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.

In Summary...

As we touched on above, Zip Co Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. When taking into account the company's strong EPS growth over the past three years, it appears CEO compensation is modest. Given the strong history of shareholder returns, the shareholders are probably very happy with Larry's performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for Zip Co that investors should be aware of in a dynamic business environment.

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. 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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