Here's Why We Think Domain Holdings Australia Limited's (ASX:DHG) CEO Compensation Looks Fair for the time being

The share price of Domain Holdings Australia Limited (ASX:DHG) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 03 November 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Domain Holdings Australia

Comparing Domain Holdings Australia Limited's CEO Compensation With the industry

Our data indicates that Domain Holdings Australia Limited has a market capitalization of AU$3.4b, and total annual CEO compensation was reported as AU$2.7m for the year to June 2021. Notably, that's an increase of 10% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$964k.

On examining similar-sized companies in the industry with market capitalizations between AU$2.6b and AU$8.5b, we discovered that the median CEO total compensation of that group was AU$3.2m. From this we gather that Jason Pellegrino is paid around the median for CEOs in the industry. Moreover, Jason Pellegrino also holds AU$4.2m worth of Domain Holdings Australia stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	AU$964k	AU$1.1m	35%
Other	AU$1.8m	AU$1.4m	65%
Total Compensation	AU$2.7m	AU$2.5m	100%

On an industry level, around 48% of total compensation represents salary and 52% is other remuneration. Domain Holdings Australia pays a modest slice of remuneration through salary, as compared 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.

Domain Holdings Australia Limited's Growth

Over the last three years, Domain Holdings Australia Limited has shrunk its earnings per share by 8.5% per year. It achieved revenue growth of 8.6% over the last year.

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. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Domain Holdings Australia Limited Been A Good Investment?

Most shareholders would probably be pleased with Domain Holdings Australia Limited for providing a total return of 138% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

Whatever your view on compensation, you might want to check if insiders are buying or selling Domain Holdings Australia shares (free trial).

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.

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.

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