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

In the past three years, the share price of Ensurance Limited (ASX:ENA) has struggled to grow and now shareholders are sitting on a loss. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 24 November 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

View our latest analysis for Ensurance

Comparing Ensurance Limited's CEO Compensation With the industry

At the time of writing, our data shows that Ensurance Limited has a market capitalization of AU$25m, and reported total annual CEO compensation of AU$418k for the year to June 2021. That is, the compensation was roughly the same as last year. In particular, the salary of AU$382.1k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$273m, we found that the median total CEO compensation was AU$435k. From this we gather that Tim James is paid around the median for CEOs in the industry.

Component	2021	2020	Proportion (2021)
Salary	AU$382k	AU$374k	92%
Other	AU$35k	AU$35k	8%
Total Compensation	AU$418k	AU$409k	100%

On an industry level, around 42% of total compensation represents salary and 58% is other remuneration. Ensurance is paying a higher share of its remuneration through a salary in comparison to the overall industry. 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.

Ensurance Limited's Growth

Ensurance Limited's earnings per share (EPS) grew 70% per year over the last three years. In the last year, its revenue is up 17%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. 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 Ensurance Limited Been A Good Investment?

Given the total shareholder loss of 18% over three years, many shareholders in Ensurance Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for Ensurance (1 is significant!) that you should be aware of before investing here.

Switching gears from Ensurance, 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.

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.

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