It Looks Like Shareholders Would Probably Approve Adairs Limited's (ASX:ADH) CEO Compensation Package

It would be hard to discount the role that CEO Mark Ronan has played in delivering the impressive results at Adairs Limited (ASX:ADH) recently. Coming up to the next AGM on 20 October 2021, shareholders would be keeping this in mind. This would also be a chance for them to hear the board review the financial results, discuss future company strategy and vote on any resolutions such as executive remuneration. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

See our latest analysis for Adairs

How Does Total Compensation For Mark Ronan Compare With Other Companies In The Industry?

According to our data, Adairs Limited has a market capitalization of AU$659m, and paid its CEO total annual compensation worth AU$1.7m over the year to June 2021. Notably, that's an increase of 58% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$616k.

For comparison, other companies in the same industry with market capitalizations ranging between AU$272m and AU$1.1b had a median total CEO compensation of AU$1.7m. From this we gather that Mark Ronan is paid around the median for CEOs in the industry. Furthermore, Mark Ronan directly owns AU$2.7m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	AU$616k	AU$552k	37%
Other	AU$1.1m	AU$507k	63%
Total Compensation	AU$1.7m	AU$1.1m	100%

On an industry level, roughly 37% of total compensation represents salary and 63% is other remuneration. Our data reveals that Adairs allocates salary more or less in line with the wider market. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Adairs Limited's Growth

Adairs Limited has seen its earnings per share (EPS) increase by 27% a year over the past three years. Its revenue is up 29% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. 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 Adairs Limited Been A Good Investment?

Boasting a total shareholder return of 120% over three years, Adairs Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. Instead, investors might be more interested in discussions that would help manage their longer-term growth expectations such as company business strategies and future growth potential.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Adairs that investors should look into moving forward.

Important note: Adairs is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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