How Is Incannex Healthcare's (ASX:IHL) CEO Compensated?

This article will reflect on the compensation paid to Joel Latham who has served as CEO of Incannex Healthcare Limited (ASX:IHL) since 2018. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

View our latest analysis for Incannex Healthcare

How Does Total Compensation For Joel Latham Compare With Other Companies In The Industry?

Our data indicates that Incannex Healthcare Limited has a market capitalization of AU$142m, and total annual CEO compensation was reported as AU$390k for the year to June 2020. We note that's an increase of 91% above last year. In particular, the salary of AU$227.0k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below AU$272m, reported a median total CEO compensation of AU$417k. From this we gather that Joel Latham is paid around the median for CEOs in the industry. Moreover, Joel Latham also holds AU$2.5m worth of Incannex Healthcare stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 66% of total compensation represents salary, while the remainder of 34% is other remuneration. Incannex Healthcare pays a modest slice of remuneration through salary, as compared to the broader industry. 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.

Incannex Healthcare Limited's Growth

Incannex Healthcare Limited's earnings per share (EPS) grew 119% per year over the last three years. Its revenue is up 4,228% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Incannex Healthcare Limited Been A Good Investment?

We think that the total shareholder return of 668%, over three years, would leave most Incannex Healthcare 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.

In Summary...

As previously discussed, Joel is compensated close to the median for companies of its size, and which belong to the same industry. The company is growing EPS and total shareholder returns have been pleasing. So one could argue that CEO compensation is quite modest, if you consider company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for Incannex Healthcare (2 make us uncomfortable!) that you should be aware of before investing here.

Switching gears from Incannex Healthcare, 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. 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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