Shareholders May Be More Conservative With Iress Limited's (ASX:IRE) CEO Compensation For Now

The share price of Iress Limited (ASX:IRE) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. The upcoming AGM on 06 May 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for Iress

Comparing Iress Limited's CEO Compensation With the industry

At the time of writing, our data shows that Iress Limited has a market capitalization of AU$1.9b, and reported total annual CEO compensation of AU$3.1m for the year to December 2020. That's a notable increase of 14% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$1.0m.

On comparing similar companies from the same industry with market caps ranging from AU$1.3b to AU$4.1b, we found that the median CEO total compensation was AU$2.3m. Accordingly, our analysis reveals that Iress Limited pays Andrew Walsh north of the industry median. Moreover, Andrew Walsh also holds AU$6.5m worth of Iress stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	AU$1.0m	AU$1.0m	32%
Other	AU$2.1m	AU$1.7m	68%
Total Compensation	AU$3.1m	AU$2.7m	100%

Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. In Iress' 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 Iress Limited's Growth Numbers

Over the last three years, Iress Limited has shrunk its earnings per share by 3.0% per year. It achieved revenue growth of 6.6% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Iress Limited Been A Good Investment?

Iress Limited has not done too badly by shareholders, with a total return of 6.4%, over three years. It would be nice to see that metric improve in the future. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.

In Summary...

Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 2 warning signs (and 1 which can't be ignored) in Iress we think you should know about.

Important note: Iress 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.

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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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