Here's Why Shareholders Should Examine Lucapa Diamond Company Limited's (ASX:LOM) CEO Compensation Package More Closely

Shareholders will probably not be too impressed with the underwhelming results at Lucapa Diamond Company Limited (ASX:LOM) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 25 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Lucapa Diamond

How Does Total Compensation For Stephen Wetherall Compare With Other Companies In The Industry?

Our data indicates that Lucapa Diamond Company Limited has a market capitalization of AU$47m, and total annual CEO compensation was reported as US$318k for the year to December 2020. That's a notable decrease of 30% on last year. Notably, the salary which is US$304.1k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below AU$258m, reported a median total CEO compensation of US$237k. This suggests that Stephen Wetherall is paid more than the median for the industry. Moreover, Stephen Wetherall also holds AU$309k worth of Lucapa Diamond stock directly under their own name.

Component	2020	2019	Proportion (2020)
Salary	US$304k	US$424k	96%
Other	US$14k	US$33k	4%
Total Compensation	US$318k	US$457k	100%

Talking in terms of the industry, salary represented approximately 69% of total compensation out of all the companies we analyzed, while other remuneration made up 31% of the pie. Lucapa Diamond pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Lucapa Diamond Company Limited's Growth

Lucapa Diamond Company Limited has reduced its earnings per share by 21% a year over the last three years. It saw its revenue drop 70% over the last year.

The decline in EPS is a bit concerning. 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 Lucapa Diamond Company Limited Been A Good Investment?

With a total shareholder return of -80% over three years, Lucapa Diamond Company Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Stephen receives almost all of their compensation through a salary. 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

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 6 warning signs for Lucapa Diamond (of which 3 are a bit concerning!) that you should know about in order to have a holistic understanding of the stock.

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

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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. 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.
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