What We Learned About Praemium's (ASX:PPS) CEO Pay

This article will reflect on the compensation paid to Michael Ohanessian who has served as CEO of Praemium Limited (ASX:PPS) since 2017. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Praemium.

View our latest analysis for Praemium

How Does Total Compensation For Michael Ohanessian Compare With Other Companies In The Industry?

At the time of writing, our data shows that Praemium Limited has a market capitalization of AU$341m, and reported total annual CEO compensation of AU$767k for the year to June 2020. We note that's an increase of 13% above last year. In particular, the salary of AU$510.0k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between AU$133m and AU$531m had a median total CEO compensation of AU$745k. From this we gather that Michael Ohanessian is paid around the median for CEOs in the industry. Moreover, Michael Ohanessian also holds AU$11m worth of Praemium stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 59% of total compensation out of all the companies we analyzed, while other remuneration made up 41% of the pie. Praemium pays out 66% of remuneration in the form of a salary, significantly higher than the industry average. 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.

Praemium Limited's Growth

Praemium Limited's earnings per share (EPS) grew 90% per year over the last three years. Its revenue is up 14% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent 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 Praemium Limited Been A Good Investment?

Praemium Limited has served shareholders reasonably well, with a total return of 11% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

As previously discussed, Michael is compensated close to the median for companies of its size, and which belong to the same industry. But EPS growth over the last three years has been impressive, although the same cannot be said for shareholder returns. As a result of these considerations, we would suggest the compensation is reasonable, but looking ahead shareholders will likely want to see healthier returns.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Praemium that investors should be aware of in a dynamic business environment.

Switching gears from Praemium, 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. 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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