Most Shareholders Will Probably Find That The Compensation For JB Hi-Fi Limited's (ASX:JBH) CEO Is Reasonable

Key Insights

• JB Hi-Fi's Annual General Meeting to take place on 31st of October
• CEO Terry Smart's total compensation includes salary of AU$1.78m
• The overall pay is 51% below the industry average
• Over the past three years, JB Hi-Fi's EPS fell by 3.1% and over the past three years, the total shareholder return was 107%

Performance at JB Hi-Fi Limited (ASX:JBH) has been rather uninspiring recently and shareholders may be wondering how CEO Terry Smart plans to fix this. At the next AGM coming up on 31st of October, they can influence managerial decision making through voting on resolutions, including executive remuneration. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. In our opinion, CEO compensation does not look excessive and we discuss why.

See our latest analysis for JB Hi-Fi

How Does Total Compensation For Terry Smart Compare With Other Companies In The Industry?

According to our data, JB Hi-Fi Limited has a market capitalization of AU$8.8b, and paid its CEO total annual compensation worth AU$5.2m over the year to June 2024. We note that's an increase of 10% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$1.8m.

For comparison, other companies in the Australian Specialty Retail industry with market capitalizations ranging between AU$6.0b and AU$18b had a median total CEO compensation of AU$10m. Accordingly, JB Hi-Fi pays its CEO under the industry median. Moreover, Terry Smart also holds AU$16m worth of JB Hi-Fi stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	AU$1.8m	AU$1.7m	34%
Other	AU$3.4m	AU$3.0m	66%
Total Compensation	AU$5.2m	AU$4.7m	100%

Speaking on an industry level, nearly 55% of total compensation represents salary, while the remainder of 45% is other remuneration. In JB Hi-Fi's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at JB Hi-Fi Limited's Growth Numbers

Over the last three years, JB Hi-Fi Limited has shrunk its earnings per share by 3.1% per year. The trailing twelve months of revenue was pretty much the same as the prior period.

Overall this is not a very positive result for shareholders. And the flat revenue hardly impresses. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 JB Hi-Fi Limited Been A Good Investment?

Boasting a total shareholder return of 107% over three years, JB Hi-Fi Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for JB Hi-Fi that you should be aware of before investing.

Switching gears from JB Hi-Fi, 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.

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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.