Increases to CEO Compensation Might Be Put On Hold For Now at Perenti Limited (ASX:PRN)

Key Insights

• Perenti will host its Annual General Meeting on 13th of October
• Salary of AU$1.08m is part of CEO Mark Alexander Norwell's total remuneration
• The total compensation is 161% higher than the average for the industry
• Perenti's EPS grew by 42% over the past three years while total shareholder loss over the past three years was 7.9%

As many shareholders of Perenti Limited (ASX:PRN) will be aware, they have not made a gain on their investment in the past three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 13th of October. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Perenti

Comparing Perenti Limited's CEO Compensation With The Industry

According to our data, Perenti Limited has a market capitalization of AU$965m, and paid its CEO total annual compensation worth AU$4.0m over the year to June 2023. Notably, that's an increase of 52% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$1.1m.

On comparing similar companies from the Australian Metals and Mining industry with market caps ranging from AU$626m to AU$2.5b, we found that the median CEO total compensation was AU$1.5m. Accordingly, our analysis reveals that Perenti Limited pays Mark Alexander Norwell north of the industry median. Furthermore, Mark Alexander Norwell directly owns AU$1.5m worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	AU$1.1m	AU$1.1m	27%
Other	AU$2.9m	AU$1.5m	73%
Total Compensation	AU$4.0m	AU$2.6m	100%

Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. It's interesting to note that Perenti allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Perenti Limited's Growth Numbers

Over the past three years, Perenti Limited has seen its earnings per share (EPS) grow by 42% per year. In the last year, its revenue is up 18%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. 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 Perenti Limited Been A Good Investment?

With a three year total loss of 7.9% for the shareholders, Perenti Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. 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. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for Perenti that investors should be aware of in a dynamic business environment.

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.

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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.