Shareholders Will Probably Hold Off On Increasing Cyclopharm Limited's (ASX:CYC) CEO Compensation For The Time Being

The share price of Cyclopharm Limited (ASX:CYC) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 04 May 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Cyclopharm

How Does Total Compensation For James McBrayer Compare With Other Companies In The Industry?

Our data indicates that Cyclopharm Limited has a market capitalization of AU$241m, and total annual CEO compensation was reported as AU$1.2m for the year to December 2020. We note that's an increase of 58% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$406k.

On examining similar-sized companies in the industry with market capitalizations between AU$129m and AU$517m, we discovered that the median CEO total compensation of that group was AU$510k. Accordingly, our analysis reveals that Cyclopharm Limited pays James McBrayer north of the industry median. What's more, James McBrayer holds AU$14m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	AU$406k	AU$341k	34%
Other	AU$780k	AU$412k	66%
Total Compensation	AU$1.2m	AU$753k	100%

On an industry level, roughly 67% of total compensation represents salary and 33% is other remuneration. It's interesting to note that Cyclopharm allocates a smaller portion of compensation to salary 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.

A Look at Cyclopharm Limited's Growth Numbers

Over the last three years, Cyclopharm Limited has shrunk its earnings per share by 69% per year. Its revenue is up 4.0% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Cyclopharm Limited Been A Good Investment?

Boasting a total shareholder return of 154% over three years, Cyclopharm Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Cyclopharm that investors should be aware of in a dynamic business environment.

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. 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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