This Is Why Compumedics Limited's (ASX:CMP) CEO Compensation Looks Appropriate

Key Insights

• Compumedics to hold its Annual General Meeting on 31st of October
• CEO David Burton's total compensation includes salary of AU$228.3k
• The overall pay is 56% below the industry average
• Compumedics' EPS declined by 31% over the past three years while total shareholder loss over the past three years was 22%

Shareholders may be wondering what CEO David Burton plans to do to improve the less than great performance at Compumedics Limited (ASX:CMP) recently. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 31st of October. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

View our latest analysis for Compumedics

How Does Total Compensation For David Burton Compare With Other Companies In The Industry?

According to our data, Compumedics Limited has a market capitalization of AU$54m, and paid its CEO total annual compensation worth AU$253k over the year to June 2024. That's mostly flat as compared to the prior year's compensation. Notably, the salary which is AU$228.3k, represents most of the total compensation being paid.

In comparison with other companies in the Australian Medical Equipment industry with market capitalizations under AU$301m, the reported median total CEO compensation was AU$574k. In other words, Compumedics pays its CEO lower than the industry median. What's more, David Burton holds AU$29m 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$228k	AU$228k	90%
Other	AU$25k	AU$24k	10%
Total Compensation	AU$253k	AU$252k	100%

Talking in terms of the industry, salary represented approximately 57% of total compensation out of all the companies we analyzed, while other remuneration made up 43% of the pie. Compumedics is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Compumedics Limited's Growth

Compumedics Limited has reduced its earnings per share by 31% a year over the last three years. Its revenue is up 17% over the last year.

The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Compumedics Limited Been A Good Investment?

Given the total shareholder loss of 22% over three years, many shareholders in Compumedics Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss is certainly disheartening. The downward trend in share price performance may be attributable to the the fact that earnings growth has gone backwards. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board’s judgement and decision-making is aligned with their expectations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for Compumedics (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.