Here's Why Shareholders May Want To Be Cautious With Increasing Hot Chili Limited's (ASX:HCH) CEO Pay Packet

Key Insights

• Hot Chili's Annual General Meeting to take place on 29th of November
• Total pay for CEO Christian Easterday includes AU$400.0k salary
• The total compensation is similar to the average for the industry
• Over the past three years, Hot Chili's EPS grew by 31% and over the past three years, the total loss to shareholders 55%

Shareholders of Hot Chili Limited (ASX:HCH) will have been dismayed by the negative share price return over the last three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 29th of November. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Hot Chili

Comparing Hot Chili Limited's CEO Compensation With The Industry

Our data indicates that Hot Chili Limited has a market capitalization of AU$135m, and total annual CEO compensation was reported as AU$427k for the year to June 2023. Notably, that's a decrease of 17% over the year before. In particular, the salary of AU$400.0k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the Australian Metals and Mining industry with market capitalizations below AU$305m, reported a median total CEO compensation of AU$386k. From this we gather that Christian Easterday is paid around the median for CEOs in the industry. What's more, Christian Easterday holds AU$680k worth of shares in the company in their own name.

Component	2023	2022	Proportion (2023)
Salary	AU$400k	AU$400k	94%
Other	AU$27k	AU$116k	6%
Total Compensation	AU$427k	AU$516k	100%

Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. Hot Chili pays out 94% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Hot Chili Limited's Growth Numbers

Over the past three years, Hot Chili Limited has seen its earnings per share (EPS) grow by 31% per year. In the last year, its revenue has collapsed effectively to zero.

This demonstrates that the company has been improving recently and is good news for the shareholders. While it would be good to see revenue growth, profits matter more in the end. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Hot Chili Limited Been A Good Investment?

With a total shareholder return of -55% over three years, Hot Chili Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Hot Chili (2 are a bit unpleasant!) that you should be aware of before investing here.

Important note: Hot Chili 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.