Increases to Hot Chili Limited's (ASX:HCH) CEO Compensation Might Cool off for now

Shareholders of Hot Chili Limited (ASX:HCH) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 30 November 2022. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should 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

At the time of writing, our data shows that Hot Chili Limited has a market capitalization of AU$108m, and reported total annual CEO compensation of AU$516k for the year to June 2022. We note that's a decrease of 30% compared to last year. Notably, the salary which is AU$400.0k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below AU$302m, reported a median total CEO compensation of AU$360k. This suggests that Christian Easterday is paid more than the median for the industry. Furthermore, Christian Easterday directly owns AU$522k worth of shares in the company.

Component	2022	2021	Proportion (2022)
Salary	AU$400k	AU$353k	78%
Other	AU$116k	AU$387k	22%
Total Compensation	AU$516k	AU$740k	100%

On an industry level, roughly 60% of total compensation represents salary and 40% is other remuneration. Hot Chili pays out 78% 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.

Hot Chili Limited's Growth

Over the past three years, Hot Chili Limited has seen its earnings per share (EPS) grow by 34% per year. It achieved revenue growth of 54% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Hot Chili Limited Been A Good Investment?

With a total shareholder return of -44% over three years, Hot Chili Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 5 warning signs for Hot Chili (of which 3 are significant!) that you should know about in order to have a holistic understanding of the stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.