Here's Why We Think Treasury Wine Estates Limited's (ASX:TWE) CEO Compensation Looks Fair for the time being

Key Insights

• Treasury Wine Estates to hold its Annual General Meeting on 17th of October
• Total pay for CEO Tim Ford includes AU$1.64m salary
• The overall pay is comparable to the industry average
• Treasury Wine Estates' EPS declined by 29% over the past three years while total shareholder return over the past three years was 6.8%

Despite positive share price growth of 6.8% for Treasury Wine Estates Limited (ASX:TWE) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 17th of October may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Treasury Wine Estates

How Does Total Compensation For Tim Ford Compare With Other Companies In The Industry?

According to our data, Treasury Wine Estates Limited has a market capitalization of AU$9.7b, and paid its CEO total annual compensation worth AU$3.9m over the year to June 2024. We note that's a decrease of 16% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$1.6m.

For comparison, other companies in the Australia Beverage industry with market capitalizations ranging between AU$5.9b and AU$18b had a median total CEO compensation of AU$5.0m. From this we gather that Tim Ford is paid around the median for CEOs in the industry. What's more, Tim Ford holds AU$5.9m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	AU$1.6m	AU$1.6m	41%
Other	AU$2.3m	AU$3.1m	59%
Total Compensation	AU$3.9m	AU$4.7m	100%

On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. It's interesting to note that Treasury Wine Estates allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Treasury Wine Estates Limited's Growth Numbers

Over the last three years, Treasury Wine Estates Limited has shrunk its earnings per share by 29% per year. It achieved revenue growth of 13% over the last year.

Overall this is not a very positive result for shareholders. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Treasury Wine Estates Limited Been A Good Investment?

Treasury Wine Estates Limited has generated a total shareholder return of 6.8% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 3 warning signs (and 1 which doesn't sit too well with us) in Treasury Wine Estates we think you should know about.

Important note: Treasury Wine Estates is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.