This Is Why QEM Limited's (ASX:QEM) CEO Compensation Looks Appropriate

QEM Limited (ASX:QEM) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. The upcoming AGM on 17 November 2022 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for QEM

How Does Total Compensation For Gavin Loyden Compare With Other Companies In The Industry?

Our data indicates that QEM Limited has a market capitalization of AU$25m, and total annual CEO compensation was reported as AU$303k for the year to June 2022. Notably, that's an increase of 38% over the year before. Notably, the salary which is AU$275.0k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below AU$310m, we found that the median total CEO compensation was AU$366k. This suggests that QEM remunerates its CEO largely in line with the industry average. Furthermore, Gavin Loyden directly owns AU$3.9m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2022	2021	Proportion (2022)
Salary	AU$275k	AU$200k	91%
Other	AU$28k	AU$19k	9%
Total Compensation	AU$303k	AU$219k	100%

Talking in terms of the industry, salary represented approximately 60% of total compensation out of all the companies we analyzed, while other remuneration made up 40% of the pie. It's interesting to note that QEM pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at QEM Limited's Growth Numbers

Over the last three years, QEM Limited has shrunk its earnings per share by 5.8% per year. In the last year, its revenue is down 24%.

Overall this is not a very positive result for shareholders. 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. 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 QEM Limited Been A Good Investment?

We think that the total shareholder return of 98%, over three years, would leave most QEM Limited shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 5 warning signs (and 3 which can't be ignored) in QEM we think you should know about.

Important note: QEM 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.