Key Things To Understand About Australian Agricultural's (ASX:AAC) CEO Pay Cheque

Hugh Killen became the CEO of Australian Agricultural Company Limited (ASX:AAC) 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.

Check out our latest analysis for Australian Agricultural

Comparing Australian Agricultural Company Limited's CEO Compensation With the industry

At the time of writing, our data shows that Australian Agricultural Company Limited has a market capitalization of AU$696m, and reported total annual CEO compensation of AU$774k for the year to March 2020. That's a slight decrease of 4.6% on the prior year. In particular, the salary of AU$643.5k, 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$258m and AU$1.0b, we discovered that the median CEO total compensation of that group was AU$913k. So it looks like Australian Agricultural compensates Hugh Killen in line with the median for the industry. What's more, Hugh Killen holds AU$327k worth of shares in the company in their own name.

Talking in terms of the industry, salary represented approximately 80% of total compensation out of all the companies we analyzed, while other remuneration made up 20% of the pie. There isn't a significant difference between Australian Agricultural and the broader market, in terms of salary allocation in the overall compensation package. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Australian Agricultural Company Limited's Growth

Over the past three years, Australian Agricultural Company Limited has seen its earnings per share (EPS) grow by 46% per year. It saw its revenue drop 9.9% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 Australian Agricultural Company Limited Been A Good Investment?

With a total shareholder return of 2.7% over three years, Australian Agricultural Company Limited has done okay by shareholders. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

As we noted earlier, Australian Agricultural pays its CEO in line with similar-sized companies belonging to the same industry. But EPS growth over the last three years has been impressive, although the same cannot be said for shareholder returns. So considering these factors, we think the compensation is probably quite reasonable, but investor returns need a boost moving forward.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Australian Agricultural (of which 2 shouldn't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Australian Agricultural, 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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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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