We Think Some Shareholders May Hesitate To Increase Bluechiip Limited's (ASX:BCT) CEO Compensation

Key Insights

• Bluechiip's Annual General Meeting to take place on 30th of November
• Salary of AU$287.6k is part of CEO Andrew McLellan's total remuneration
• The overall pay is 45% above the industry average
• Over the past three years, Bluechiip's EPS grew by 2.8% and over the past three years, the total loss to shareholders 63%

Shareholders of Bluechiip Limited (ASX:BCT) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 30th of November could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Bluechiip

How Does Total Compensation For Andrew McLellan Compare With Other Companies In The Industry?

According to our data, Bluechiip Limited has a market capitalization of AU$17m, and paid its CEO total annual compensation worth AU$604k over the year to June 2023. That's just a smallish increase of 5.7% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$288k.

For comparison, other companies in the Australia Electronic industry with market capitalizations below AU$306m, reported a median total CEO compensation of AU$418k. Hence, we can conclude that Andrew McLellan is remunerated higher than the industry median. Furthermore, Andrew McLellan directly owns AU$235k worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	AU$288k	AU$268k	48%
Other	AU$317k	AU$303k	52%
Total Compensation	AU$604k	AU$572k	100%

On an industry level, around 66% of total compensation represents salary and 34% is other remuneration. Bluechiip pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Bluechiip Limited's Growth

Bluechiip Limited's earnings per share (EPS) grew 2.8% per year over the last three years. It saw its revenue drop 1.3% over the last 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. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Bluechiip Limited Been A Good Investment?

The return of -63% over three years would not have pleased Bluechiip Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 6 warning signs for Bluechiip you should be aware of, and 4 of them can't be ignored.

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.

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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.