It would be hard to discount the role that CEO Andreas Kroell has played in delivering the impressive results at De.mem Limited (ASX:DEM) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 25 May 2021. The focus will probably be on the future company strategy as shareholders cast their votes on resolutions such as executive remuneration and other matters. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.
View our latest analysis for De.mem
How Does Total Compensation For Andreas Kroell Compare With Other Companies In The Industry?
According to our data, De.mem Limited has a market capitalization of AU$58m, and paid its CEO total annual compensation worth AU$388k over the year to December 2020. We note that's an increase of 47% above last year. Notably, the salary which is AU$276.3k, represents most of the total compensation being paid.
On comparing similar-sized companies in the industry with market capitalizations below AU$258m, we found that the median total CEO compensation was AU$407k. From this we gather that Andreas Kroell is paid around the median for CEOs in the industry. Moreover, Andreas Kroell also holds AU$884k worth of De.mem 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$276k | AU$227k | 71% |
| Other | AU$111k | AU$37k | 29% |
| Total Compensation | AU$388k | AU$264k | 100% |
On an industry level, roughly 41% of total compensation represents salary and 59% is other remuneration. De.mem is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at De.mem Limited's Growth Numbers
De.mem Limited has seen its earnings per share (EPS) increase by 48% a year over the past three years. Its revenue is up 40% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has De.mem Limited Been A Good Investment?
We think that the total shareholder return of 83%, over three years, would leave most De.mem Limited shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
To Conclude...
Some shareholders will probably be more lenient on CEO compensation in the upcoming AGM given the pleasing performance of the company recently. Seeing that earnings growth and share price performance seems to be on the right path, the more pressing focus for shareholders at the AGM may be how the board and management plans to turn the company into a sustainably profitable one.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 3 warning signs for De.mem that investors should be aware of in a dynamic business environment.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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About ASX:DEM
De.mem
Designs, builds, owns, and operates modern water treatment systems for industrial, municipal, and residential sector in Australia, Singapore, and Germany.
Flawless balance sheet and slightly overvalued.
