Is Lithium Australia NL’s (ASX:LIT) CEO Salary Justified?

Adrian Griffin became the CEO of Lithium Australia NL (ASX:LIT) in 2011. First, this article will compare CEO compensation with compensation at similar sized companies. 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.

View 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$37m, and is paying total annual CEO compensation of AU$705k. (This figure is for the year to June 2018). We think total compensation is more important but we note that the CEO salary is lower, at AU$357k. We examined a group of similar sized companies, with market capitalizations of below AU$285m. The median CEO total compensation in that group is AU$354k.

As you can see, Adrian Griffin is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Lithium Australia NL is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.

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

ASX:LIT CEO Compensation, April 26th 2019
ASX:LIT CEO Compensation, April 26th 2019

Is Lithium Australia NL Growing?

On average over the last three years, Lithium Australia NL has shrunk earnings per share by 20% each year (measured with a line of best fit). It saw its revenue drop -19% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don’t have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Lithium Australia NL Been A Good Investment?

Since shareholders would have lost about 67% over three years, some Lithium Australia NL shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

We compared the total CEO remuneration paid by Lithium Australia NL, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

Just as bad, share price gains for investors have failed to materialize, over the same period. This analysis suggests to us that the CEO is paid too generously! Shareholders may want to check for free if Lithium Australia insiders are buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.