Emmerson Resources Limited's (ASX:ERM) CEO Might Not Expect Shareholders To Be So Generous This Year

Shareholders will probably not be too impressed with the underwhelming results at Emmerson Resources Limited (ASX:ERM) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 24 November 2022. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Our analysis indicates that ERM is potentially overvalued!

Comparing Emmerson Resources Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Emmerson Resources Limited has a market capitalization of AU$47m, and reported total annual CEO compensation of AU$491k for the year to June 2022. That's a fairly small increase of 7.2% over the previous year. In particular, the salary of AU$300.0k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under AU$301m, the reported median total CEO compensation was AU$371k. This suggests that Rob Bills is paid more than the median for the industry. Moreover, Rob Bills also holds AU$758k worth of Emmerson Resources stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2022	2021	Proportion (2022)
Salary	AU$300k	AU$340k	61%
Other	AU$191k	AU$118k	39%
Total Compensation	AU$491k	AU$458k	100%

Speaking on an industry level, nearly 60% of total compensation represents salary, while the remainder of 40% is other remuneration. Our data reveals that Emmerson Resources allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Emmerson Resources Limited's Growth

Emmerson Resources Limited saw earnings per share stay pretty flat over the last three years. In the last year, its revenue is down 44%.

Its a bit disappointing to see that the company has failed to grow its EPS. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Emmerson Resources Limited Been A Good Investment?

Given the total shareholder loss of 22% over three years, many shareholders in Emmerson Resources Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

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 pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Emmerson Resources (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Emmerson Resources 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.