Leslie Chong became the CEO of Imugene Limited (ASX:IMU) in 2016, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Imugene Limited's CEO Compensation With the industry
According to our data, Imugene Limited has a market capitalization of AU$547m, and paid its CEO total annual compensation worth AU$733k over the year to June 2020. That's a slightly lower by 5.7% over the previous year. In particular, the salary of AU$375.0k, makes up a huge portion of the total compensation being paid to the CEO.
For comparison, other companies in the same industry with market capitalizations ranging between AU$258m and AU$1.0b had a median total CEO compensation of AU$685k. This suggests that Imugene remunerates its CEO largely in line with the industry average. Furthermore, Leslie Chong directly owns AU$3.3m worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 69% of total compensation out of all the companies we analyzed, while other remuneration made up 31% of the pie. In Imugene's case, non-salary compensation represents a greater slice of total remuneration, in comparison 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.
A Look at Imugene Limited's Growth Numbers
Over the last three years, Imugene Limited has shrunk its earnings per share by 31% per year. In the last year, its revenue changed by just 0.06%.
Overall this is not a very positive result for shareholders. And the flat revenue hardly impresses. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Imugene Limited Been A Good Investment?
We think that the total shareholder return of 456%, over three years, would leave most Imugene Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As we noted earlier, Imugene pays its CEO in line with similar-sized companies belonging to the same industry. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We wouldn't say CEO compensation is too high, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 6 warning signs for Imugene (1 doesn't sit too well with us!) 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.
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