Here's Why Shareholders May Want To Be Cautious With Increasing Finbar Group Limited's (ASX:FRI) CEO Pay Packet

Key Insights

• Finbar Group will host its Annual General Meeting on 18th of October
• CEO Darren Pateman's total compensation includes salary of AU$726.8k
• Total compensation is 96% above industry average
• Finbar Group's total shareholder return over the past three years was 16% while its EPS was down 22% over the past three years

The share price of Finbar Group Limited (ASX:FRI) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. The upcoming AGM on 18th of October may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Finbar Group

Comparing Finbar Group Limited's CEO Compensation With The Industry

Our data indicates that Finbar Group Limited has a market capitalization of AU$177m, and total annual CEO compensation was reported as AU$817k for the year to June 2023. Notably, that's a decrease of 18% over the year before. In particular, the salary of AU$726.8k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Australian Real Estate industry with market capitalizations under AU$312m, the reported median total CEO compensation was AU$416k. Accordingly, our analysis reveals that Finbar Group Limited pays Darren Pateman north of the industry median. Furthermore, Darren Pateman directly owns AU$2.4m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	AU$727k	AU$738k	89%
Other	AU$90k	AU$263k	11%
Total Compensation	AU$817k	AU$1.0m	100%

Speaking on an industry level, nearly 80% of total compensation represents salary, while the remainder of 20% is other remuneration. Finbar Group pays out 89% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Finbar Group Limited's Growth

Finbar Group Limited has reduced its earnings per share by 22% a year over the last three years. Its revenue is down 63% over the previous year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Finbar Group Limited Been A Good Investment?

Finbar Group Limited has served shareholders reasonably well, with a total return of 16% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

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. That's why we did some digging and identified 3 warning signs for Finbar Group that investors should think about before committing capital to this stock.

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.

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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.