What Can We Learn About Fremont Petroleum's (ASX:FPL) CEO Compensation?

Tim Hart became the CEO of Fremont Petroleum Corporation Ltd (ASX:FPL) in 2016, 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 assess whether Fremont Petroleum pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Fremont Petroleum

Comparing Fremont Petroleum Corporation Ltd's CEO Compensation With the industry

According to our data, Fremont Petroleum Corporation Ltd has a market capitalization of AU$12m, and paid its CEO total annual compensation worth AU$229k over the year to June 2020. Notably, that's a decrease of 37% over the year before. We note that the salary portion, which stands at AU$190.6k constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under AU$263m, the reported median total CEO compensation was AU$351k. Accordingly, Fremont Petroleum pays its CEO under the industry median. What's more, Tim Hart holds AU$69k worth of shares in the company in their own name.

On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. Fremont Petroleum is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. 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.

A Look at Fremont Petroleum Corporation Ltd's Growth Numbers

Fremont Petroleum Corporation Ltd's earnings per share (EPS) grew 88% per year over the last three years. Its revenue is down 44% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Fremont Petroleum Corporation Ltd Been A Good Investment?

Given the total shareholder loss of 50% over three years, many shareholders in Fremont Petroleum Corporation Ltd are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As previously discussed, Tim is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. However, the EPS growth over three years is certainly impressive. Considering EPS are on the up, we would say Tim is compensated fairly. Shareholders, though, would ideally like to see shareholder returns head north before they agree to any raise.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Fremont Petroleum you should be aware of, and 3 of them are potentially serious.

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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