Should Shareholders Reconsider Essential Energy Services Ltd.'s (TSE:ESN) CEO Compensation Package?

Shareholders will probably not be too impressed with the underwhelming results at Essential Energy Services Ltd. (TSE:ESN) recently. At the upcoming AGM on 17 May 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Essential Energy Services

How Does Total Compensation For Garnet Amundson Compare With Other Companies In The Industry?

Our data indicates that Essential Energy Services Ltd. has a market capitalization of CA$48m, and total annual CEO compensation was reported as CA$1.2m for the year to December 2020. We note that's a small decrease of 5.2% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at CA$278k.

On comparing similar-sized companies in the industry with market capitalizations below CA$242m, we found that the median total CEO compensation was CA$613k. Hence, we can conclude that Garnet Amundson is remunerated higher than the industry median. Furthermore, Garnet Amundson directly owns CA$424k worth of shares in the company.

Component	2020	2019	Proportion (2020)
Salary	CA$278k	CA$322k	24%
Other	CA$898k	CA$918k	76%
Total Compensation	CA$1.2m	CA$1.2m	100%

On an industry level, roughly 39% of total compensation represents salary and 61% is other remuneration. Essential Energy Services sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Essential Energy Services Ltd.'s Growth

Over the last three years, Essential Energy Services Ltd. has shrunk its earnings per share by 55% per year. Its revenue is down 37% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Essential Energy Services Ltd. Been A Good Investment?

The return of -43% over three years would not have pleased Essential Energy Services Ltd. shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Essential Energy Services that investors should think about before committing capital to this stock.

Switching gears from Essential Energy Services, 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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