We Discuss Why Red Metal Limited's (ASX:RDM) CEO Compensation May Be Closely Reviewed

Key Insights

• Red Metal to hold its Annual General Meeting on 17th of November
• Salary of AU$290.3k is part of CEO Rob Rutherford's total remuneration
• The overall pay is 60% above the industry average
• Red Metal's three-year loss to shareholders was 20% while its EPS was down 89% over the past three years

The results at Red Metal Limited (ASX:RDM) have been quite disappointing recently and CEO Rob Rutherford bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 17th of November. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for Red Metal

How Does Total Compensation For Rob Rutherford Compare With Other Companies In The Industry?

According to our data, Red Metal Limited has a market capitalization of AU$23m, and paid its CEO total annual compensation worth AU$628k over the year to June 2023. That's mostly flat as compared to the prior year's compensation. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$290k.

On comparing similar-sized companies in the Australian Metals and Mining industry with market capitalizations below AU$315m, we found that the median total CEO compensation was AU$392k. Accordingly, our analysis reveals that Red Metal Limited pays Rob Rutherford north of the industry median. Furthermore, Rob Rutherford directly owns AU$1.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	AU$290k	AU$237k	46%
Other	AU$338k	AU$393k	54%
Total Compensation	AU$628k	AU$630k	100%

On an industry level, roughly 61% of total compensation represents salary and 39% is other remuneration. Red Metal 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.

Red Metal Limited's Growth

Over the last three years, Red Metal Limited has shrunk its earnings per share by 89% per year. In the last year, its revenue is up 4.6%.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Red Metal Limited Been A Good Investment?

Since shareholders would have lost about 20% over three years, some Red Metal Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Red Metal (1 is potentially serious!) that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.