Here's Why Shareholders Should Examine Aurelia Metals Limited's (ASX:AMI) CEO Compensation Package More Closely

Shareholders will probably not be too impressed with the underwhelming results at Aurelia Metals Limited (ASX:AMI) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 22 November 2022. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

Our analysis indicates that AMI is potentially undervalued!

How Does Total Compensation For Dan Clifford Compare With Other Companies In The Industry?

According to our data, Aurelia Metals Limited has a market capitalization of AU$148m, and paid its CEO total annual compensation worth AU$1.4m over the year to June 2022. We note that's a decrease of 29% compared to last year. We note that the salary of AU$725.5k makes up a sizeable portion of the total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under AU$298m, the reported median total CEO compensation was AU$361k. Accordingly, our analysis reveals that Aurelia Metals Limited pays Dan Clifford north of the industry median. Moreover, Dan Clifford also holds AU$403k worth of Aurelia Metals stock directly under their own name.

Component	2022	2021	Proportion (2022)
Salary	AU$726k	AU$702k	51%
Other	AU$693k	AU$1.3m	49%
Total Compensation	AU$1.4m	AU$2.0m	100%

On an industry level, around 60% of total compensation represents salary and 40% is other remuneration. Aurelia Metals sets aside a smaller share of compensation for 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.

Aurelia Metals Limited's Growth

Over the last three years, Aurelia Metals Limited has shrunk its earnings per share by 57% per year. In the last year, its revenue is up 5.4%.

Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Aurelia Metals Limited Been A Good Investment?

The return of -71% over three years would not have pleased Aurelia Metals Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 2 warning signs for Aurelia Metals that investors should look into moving forward.

Important note: Aurelia Metals 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.