Does Lithium Australia NL’s (ASX:LIT) CEO Pay Reflect Performance?

In 2011 Adrian Griffin was appointed CEO of Lithium Australia NL (ASX:LIT). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Lithium Australia

How Does Adrian Griffin’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Lithium Australia NL has a market cap of AU$42m, and is paying total annual CEO compensation of AU$705k. (This is based on the year to 2018). We think total compensation is more important but we note that the CEO salary is lower, at AU$357k. We looked at a group of companies with market capitalizations under AU$285m, and the median CEO compensation was AU$370k.

Thus we can conclude that Adrian Griffin receives more in total compensation than the median of a group of companies in the same market, and of similar size to Lithium Australia NL. However, this doesn’t necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. Take a look at Lithium Australia’s key growth metrics by clicking on this link to view earnings, revenue and cash flow.

You can see, below, how CEO compensation at Lithium Australia has changed over time.

ASX:LIT CEO Compensation January 4th 19
ASX:LIT CEO Compensation January 4th 19

Is Lithium Australia NL Growing?

Over the last three years Lithium Australia NL has shrunk its earnings per share by an average of 3.2% per year. Its revenue is down -48% over last year.

Unfortunately, earnings per share have trended lower over the last three years. And the fact that revenue is down year on year arguably paints an ugly picture. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.

Has Lithium Australia NL Been A Good Investment?

Given the total loss of 44% over three years, many shareholders in Lithium Australia NL are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We examined the amount Lithium Australia NL pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

We think many shareholders would be underwhelmed with the business growth over the last three years.

Just as bad, share price gains for investors have failed to materialize, over the same period. In our opinion the CEO might be paid too generously! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Lithium Australia.

If you want to buy a stock that is better than Lithium Australia, this free list of high return, low debt companies is a great place to look.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.