This article will reflect on the compensation paid to Grant Lewis Kelley who has served as CEO of Vicinity Centres (ASX:VCX) since 2018. This analysis will also assess whether Vicinity Centres pays its CEO appropriately, considering its funds from operations growth and total shareholder returns.
See our latest analysis for Vicinity Centres
How Does Total Compensation For Grant Lewis Kelley Compare With Other Companies In The Industry?
According to our data, Vicinity Centres has a market capitalization of AU$7.1b, and paid its CEO total annual compensation worth AU$1.6m over the year to June 2020. Notably, that's a decrease of 31% over the year before. We note that the salary portion, which stands at AU$1.38m constitutes the majority of total compensation received by the CEO.
On examining similar-sized companies in the industry with market capitalizations between AU$5.1b and AU$15b, we discovered that the median CEO total compensation of that group was AU$3.8m. In other words, Vicinity Centres pays its CEO lower than the industry median. Furthermore, Grant Lewis Kelley directly owns AU$521k worth of shares in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | AU$1.4m | AU$1.5m | 88% |
| Other | AU$187k | AU$781k | 12% |
| Total Compensation | AU$1.6m | AU$2.3m | 100% |
On an industry level, around 54% of total compensation represents salary and 46% is other remuneration. Vicinity Centres pays out 88% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Vicinity Centres' Growth Numbers
Over the last three years, Vicinity Centres has shrunk its funds from operations (FFO) by 10.0% per year. In the last year, its revenue is down 16%.
The decline in FFO is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Vicinity Centres Been A Good Investment?
Since shareholders would have lost about 32% over three years, some Vicinity Centres investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
To Conclude...
As we touched on above, Vicinity Centres is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. While we are quite underwhelmed with FFO growth, the shareholder returns over the past three years have also failed to impress us. It's tough to say that Grant Lewis is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Vicinity Centres 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. 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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About ASX:VCX
Vicinity Centres
Vicinity Centres (Vicinity or the Group) is one of Australia’s leading retail property groups with a fully integrated asset management platform, and $24 billion in retail assets under management across 56 shopping centres, making it the second largest listed manager of Australian retail property.
Undervalued with proven track record.
