Shareholders May Be More Conservative With Empire Energy Group Limited's (ASX:EEG) CEO Compensation For Now

By
Simply Wall St
Published
May 20, 2021
ASX:EEG
Source: Shutterstock

In the past three years, shareholders of Empire Energy Group Limited (ASX:EEG) have seen a loss on their investment. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 27 May 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Empire Energy Group

Comparing Empire Energy Group Limited's CEO Compensation With the industry

At the time of writing, our data shows that Empire Energy Group Limited has a market capitalization of AU$117m, and reported total annual CEO compensation of AU$800k for the year to December 2020. Notably, that's an increase of 41% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$369k.

On comparing similar-sized companies in the industry with market capitalizations below AU$258m, we found that the median total CEO compensation was AU$324k. This suggests that Alex Underwood is paid more than the median for the industry. Moreover, Alex Underwood also holds AU$725k worth of Empire Energy Group stock directly under their own name.

Component20202019Proportion (2020)
Salary AU$369k AU$398k 46%
Other AU$430k AU$171k 54%
Total CompensationAU$800k AU$568k100%

On an industry level, roughly 68% of total compensation represents salary and 32% is other remuneration. In Empire Energy Group'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:EEG CEO Compensation May 20th 2021

Empire Energy Group Limited's Growth

Empire Energy Group Limited's earnings per share (EPS) grew 60% per year over the last three years. In the last year, its revenue is down 17%.

This demonstrates that the company has been improving recently and is good news for the shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Empire Energy Group Limited Been A Good Investment?

Since shareholders would have lost about 10.0% over three years, some Empire Energy Group Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 4 warning signs for Empire Energy Group that investors should look into moving forward.

Switching gears from Empire Energy Group, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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