Is Reckon Limited’s (ASX:RKN) CEO Pay Justified?

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The CEO of Reckon Limited (ASX:RKN) is Sam Allert. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Reckon

How Does Sam Allert’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Reckon Limited has a market cap of AU$64m, and is paying total annual CEO compensation of AU$723k. (This number is for the twelve months until December 2018). Notably, that’s an increase of 8.8% over the year before. While we always look at total compensation first, we note that the salary component is less, at AU$504k. We took a group of companies with market capitalizations below AU$287m, and calculated the median CEO total compensation to be AU$358k.

Thus we can conclude that Sam Allert receives more in total compensation than the median of a group of companies in the same market, and of similar size to Reckon Limited. However, this doesn’t necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Reckon has changed over time.

ASX:RKN CEO Compensation, June 26th 2019
ASX:RKN CEO Compensation, June 26th 2019

Is Reckon Limited Growing?

Reckon Limited has reduced its earnings per share by an average of 39% a year, over the last three years (measured with a line of best fit). It saw its revenue drop -6.1% over the last year.

Sadly for shareholders, earnings per share are actually down, over three years. This is compounded by the fact revenue is actually down on last year. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.

Has Reckon Limited Been A Good Investment?

Since shareholders would have lost about 57% over three years, some Reckon Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

We examined the amount Reckon Limited pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

Arguably worse, investors are without a positive return for the last three years. Notably, the CEO remuneration is actually up on last year. This analysis suggests to us that the CEO is paid too generously! So you may want to check if insiders are buying Reckon shares with their own money (free access).

Important note: Reckon may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.