We Think Buru Energy Limited's (ASX:BRU) CEO Compensation Package Needs To Be Put Under A Microscope

The results at Buru Energy Limited (ASX:BRU) have been quite disappointing recently and CEO Eric Streitberg bears some responsibility for this. At the upcoming AGM on 06 May 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Buru Energy

Comparing Buru Energy Limited's CEO Compensation With the industry

At the time of writing, our data shows that Buru Energy Limited has a market capitalization of AU$84m, and reported total annual CEO compensation of AU$529k for the year to December 2020. Notably, that's a decrease of 26% over the year before. In particular, the salary of AU$419.3k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under AU$257m, the reported median total CEO compensation was AU$335k. Hence, we can conclude that Eric Streitberg is remunerated higher than the industry median. Moreover, Eric Streitberg also holds AU$4.2m worth of Buru Energy stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	AU$419k	AU$579k	79%
Other	AU$110k	AU$137k	21%
Total Compensation	AU$529k	AU$716k	100%

Speaking on an industry level, nearly 68% of total compensation represents salary, while the remainder of 32% is other remuneration. According to our research, Buru Energy has allocated a higher percentage of pay to salary in comparison to the wider industry. 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.

Buru Energy Limited's Growth

Over the last three years, Buru Energy Limited has shrunk its earnings per share by 91% per year. In the last year, its revenue is down 18%.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Buru Energy Limited Been A Good Investment?

Few Buru Energy Limited shareholders would feel satisfied with the return of -44% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

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 Buru Energy that investors should be aware of in a dynamic business environment.

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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