We Take A Look At Whether Wesfarmers Limited's (ASX:WES) CEO May Be Underpaid

The solid performance at Wesfarmers Limited (ASX:WES) has been impressive and shareholders will probably be pleased to know that CEO Rob Scott has delivered. This would be kept in mind at the upcoming AGM on 21 October 2021 which will be a chance for them to hear the board review the financial results, discuss future company strategy and vote on resolutions such as executive remuneration and other matters. Here we will show why we think CEO compensation is appropriate and discuss the case for a pay rise.

See our latest analysis for Wesfarmers

Comparing Wesfarmers Limited's CEO Compensation With the industry

At the time of writing, our data shows that Wesfarmers Limited has a market capitalization of AU$62b, and reported total annual CEO compensation of AU$6.9m for the year to June 2021. Notably, that's a decrease of 11% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$2.3m.

In comparison with other companies in the industry with market capitalizations over AU$11b , the reported median total CEO compensation was AU$11m. This suggests that Rob Scott is paid below the industry median. Furthermore, Rob Scott directly owns AU$19m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	AU$2.3m	AU$2.3m	33%
Other	AU$4.6m	AU$5.4m	67%
Total Compensation	AU$6.9m	AU$7.8m	100%

On an industry level, roughly 49% of total compensation represents salary and 51% is other remuneration. Wesfarmers pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Wesfarmers Limited's Growth Numbers

Over the past three years, Wesfarmers Limited has seen its earnings per share (EPS) grow by 19% per year. Its revenue is up 10% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. 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 Wesfarmers Limited Been A Good Investment?

We think that the total shareholder return of 85%, over three years, would leave most Wesfarmers Limited shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in 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.

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 Wesfarmers 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.

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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