Should Shareholders Reconsider SportsHero Limited's (ASX:SHO) CEO Compensation Package?

Key Insights

• SportsHero to hold its Annual General Meeting on 24th of November
• Total pay for CEO Tom Tonavanik includes US$161.3k salary
• The total compensation is similar to the average for the industry
• Over the past three years, SportsHero's EPS fell by 0.7% and over the past three years, the total loss to shareholders 36%

Shareholders will probably not be too impressed with the underwhelming results at SportsHero Limited (ASX:SHO) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 24th 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. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for SportsHero

Comparing SportsHero Limited's CEO Compensation With The Industry

Our data indicates that SportsHero Limited has a market capitalization of AU$12m, and total annual CEO compensation was reported as US$161k for the year to June 2023. We note that's a small decrease of 4.4% on last year. It is worth noting that the CEO compensation consists entirely of the salary, worth US$161k.

On comparing similar-sized companies in the Australia Entertainment industry with market capitalizations below AU$308m, we found that the median total CEO compensation was US$192k. From this we gather that Tom Tonavanik is paid around the median for CEOs in the industry. Furthermore, Tom Tonavanik directly owns AU$289k worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	US$161k	US$147k	100%
Other	-	US$22k	-
Total Compensation	US$161k	US$169k	100%

Speaking on an industry level, nearly 63% of total compensation represents salary, while the remainder of 37% is other remuneration. At the company level, SportsHero pays Tom Tonavanik solely through a salary, preferring to go down a conventional route. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

SportsHero Limited's Growth

Earnings per share at SportsHero Limited are much the same as they were three years ago, albeit slightly lower. In the last year, its revenue is down 60%.

A lack of EPS improvement is not good to see. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has SportsHero Limited Been A Good Investment?

With a total shareholder return of -36% over three years, SportsHero Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

SportsHero pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. 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 compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 4 warning signs for SportsHero that investors should look into moving forward.

Switching gears from SportsHero, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.