Here's Why We Think Norwood Systems Limited's (ASX:NOR) CEO Compensation Looks Fair for the time being

Key Insights

• Norwood Systems will host its Annual General Meeting on 19th of December
• CEO Paul Ostergaard's total compensation includes salary of AU$288.9k
• The total compensation is similar to the average for the industry
• Norwood Systems' total shareholder return over the past three years was 71% while its EPS grew by 9.7% over the past three years

Under the guidance of CEO Paul Ostergaard, Norwood Systems Limited (ASX:NOR) has performed reasonably well recently. As shareholders go into the upcoming AGM on 19th of December, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. We present our case of why we think CEO compensation looks fair.

Check out our latest analysis for Norwood Systems

Comparing Norwood Systems Limited's CEO Compensation With The Industry

According to our data, Norwood Systems Limited has a market capitalization of AU$18m, and paid its CEO total annual compensation worth AU$451k over the year to June 2023. Notably, that's an increase of 74% over the year before. Notably, the salary which is AU$288.9k, represents most of the total compensation being paid.

In comparison with other companies in the Australian Software industry with market capitalizations under AU$304m, the reported median total CEO compensation was AU$497k. This suggests that Norwood Systems remunerates its CEO largely in line with the industry average. Furthermore, Paul Ostergaard directly owns AU$1.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	AU$289k	AU$236k	64%
Other	AU$162k	AU$24k	36%
Total Compensation	AU$451k	AU$260k	100%

On an industry level, around 57% of total compensation represents salary and 43% is other remuneration. According to our research, Norwood Systems has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Norwood Systems Limited's Growth Numbers

Norwood Systems Limited's earnings per share (EPS) grew 9.7% per year over the last three years. Its revenue is down 22% over the previous year.

We would argue that the lack of revenue growth in the last year is less than ideal, but it is good to see a modest EPS growth at least. It's hard to reach a conclusion about business performance right now. This may be one to watch. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Norwood Systems Limited Been A Good Investment?

Most shareholders would probably be pleased with Norwood Systems Limited for providing a total return of 71% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Seeing that the company has put up a decent performance, only a few shareholders, if any at all, might have questions about the CEO pay in the upcoming AGM. In saying that, any proposed increase to CEO compensation will still be assessed on how reasonable it is based on performance and industry benchmarks.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for Norwood Systems (2 can't be ignored!) that you should be aware of before investing here.

Important note: Norwood Systems 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. 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.