How Is National Tyre & Wheel's (ASX:NTD) CEO Paid Relative To Peers?

John Ludemann became the CEO of National Tyre & Wheel Limited (ASX:NTD) in 2013, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for National Tyre & Wheel

Comparing National Tyre & Wheel Limited's CEO Compensation With the industry

At the time of writing, our data shows that National Tyre & Wheel Limited has a market capitalization of AU$101m, and reported total annual CEO compensation of AU$679k for the year to June 2020. That's a modest increase of 4.3% on the prior year. In particular, the salary of AU$507.2k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$265m, we found that the median total CEO compensation was AU$409k. This suggests that John Ludemann is paid more than the median for the industry. What's more, John Ludemann holds AU$2.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 67% of total compensation out of all the companies we analyzed, while other remuneration made up 33% of the pie. National Tyre & Wheel is paying a higher share of its remuneration through a salary in comparison to the overall industry. 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.

National Tyre & Wheel Limited's Growth

Over the last three years, National Tyre & Wheel Limited has shrunk its earnings per share by 18% per year. In the last year, its revenue is down 5.6%.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 National Tyre & Wheel Limited Been A Good Investment?

Given the total shareholder loss of 19% over three years, many shareholders in National Tyre & Wheel Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As we noted earlier, National Tyre & Wheel pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Disappointingly, share price gains over the last three years have failed to materialize. To make matters worse, EPS growth has also been negative during this period. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 4 warning signs for National Tyre & Wheel that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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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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