Here's Why Shareholders May Want To Be Cautious With Increasing New World Resources Limited's (ASX:NWC) CEO Pay Packet

Key Insights

• New World Resources will host its Annual General Meeting on 9th of November
• Salary of AU$348.6k is part of CEO Mike Haynes's total remuneration
• Total compensation is 110% above industry average
• Over the past three years, New World Resources' EPS fell by 14% and over the past three years, the total loss to shareholders 43%

The underwhelming share price performance of New World Resources Limited (ASX:NWC) in the past three years would have disappointed many shareholders. In addition, the company's per-share earnings growth is not looking good, despite growing revenues. Shareholders will have a chance to take their concerns to the board at the next AGM on 9th of November and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's our take on why we think shareholders might be hesitant about approving a raise at the moment.

View our latest analysis for New World Resources

Comparing New World Resources Limited's CEO Compensation With The Industry

Our data indicates that New World Resources Limited has a market capitalization of AU$57m, and total annual CEO compensation was reported as AU$810k for the year to June 2023. That's a notable increase of 70% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$349k.

For comparison, other companies in the Australian Metals and Mining industry with market capitalizations below AU$311m, reported a median total CEO compensation of AU$385k. Accordingly, our analysis reveals that New World Resources Limited pays Mike Haynes north of the industry median. What's more, Mike Haynes holds AU$1.0m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	AU$349k	AU$324k	43%
Other	AU$461k	AU$153k	57%
Total Compensation	AU$810k	AU$477k	100%

On an industry level, around 61% of total compensation represents salary and 39% is other remuneration. New World Resources sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

New World Resources Limited's Growth

Over the last three years, New World Resources Limited has shrunk its earnings per share by 14% per year. Its revenue is up 2,390% over the last year.

The decrease in EPS could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. 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 New World Resources Limited Been A Good Investment?

With a total shareholder return of -43% over three years, New World Resources 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 loss to shareholders over the past three years is certainly concerning and possibly has something to do with the fact that the company's earnings haven't grown. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 6 warning signs for New World Resources you should be aware of, and 3 of them make us uncomfortable.

Important note: New World Resources 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.