Shareholders May Be More Conservative With Medlab Clinical Limited's (ASX:MDC) CEO Compensation For Now

Shareholders of Medlab Clinical Limited (ASX:MDC) will have been dismayed by the negative share price return over the last three years. In addition, the company's per-share earnings growth is not looking good, despite growing revenues. Shareholders will have a chance to take their concerns to the board at the next AGM on 13 October 2021 and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

See our latest analysis for Medlab Clinical

Comparing Medlab Clinical Limited's CEO Compensation With the industry

At the time of writing, our data shows that Medlab Clinical Limited has a market capitalization of AU$53m, and reported total annual CEO compensation of AU$677k for the year to June 2021. That's a notable increase of 79% on last year. In particular, the salary of AU$444.2k, 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$274m, reported a median total CEO compensation of AU$467k. This suggests that Sean Hall is paid more than the median for the industry. What's more, Sean Hall holds AU$9.1m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	AU$444k	AU$300k	66%
Other	AU$233k	AU$79k	34%
Total Compensation	AU$677k	AU$379k	100%

On an industry level, around 57% of total compensation represents salary and 43% is other remuneration. Medlab Clinical pays out 66% of remuneration in the form of a salary, significantly higher than the industry average. 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 Medlab Clinical Limited's Growth Numbers

Medlab Clinical Limited has reduced its earnings per share by 19% a year over the last three years. Its revenue is up 54% over the last year.

The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Medlab Clinical Limited Been A Good Investment?

With a total shareholder return of -61% over three years, Medlab Clinical 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...

The company's earnings haven't grown and possibly because of that, the stock has performed poorly, resulting in a loss for the company's shareholders. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 5 warning signs for Medlab Clinical that investors should think about before committing capital to this stock.

Switching gears from Medlab Clinical, 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.

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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