Shareholders May Be More Conservative With Inspired Energy PLC's (LON:INSE) CEO Compensation For Now

Despite Inspired Energy PLC's (LON:INSE) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 30 June 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Inspired Energy

How Does Total Compensation For Mark Dickinson Compare With Other Companies In The Industry?

At the time of writing, our data shows that Inspired Energy PLC has a market capitalization of UK£191m, and reported total annual CEO compensation of UK£553k for the year to December 2020. 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 UK£275k.

On examining similar-sized companies in the industry with market capitalizations between UK£72m and UK£286m, we discovered that the median CEO total compensation of that group was UK£205k. This suggests that Mark Dickinson is paid more than the median for the industry. Furthermore, Mark Dickinson directly owns UK£249k worth of shares in the company.

Component	2020	2019	Proportion (2020)
Salary	UK£275k	UK£269k	50%
Other	UK£278k	UK£254k	50%
Total Compensation	UK£553k	UK£523k	100%

Talking in terms of the industry, salary represented approximately 66% of total compensation out of all the companies we analyzed, while other remuneration made up 34% of the pie. In Inspired Energy's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Inspired Energy PLC's Growth Numbers

Over the last three years, Inspired Energy PLC has shrunk its earnings per share by 49% per year. In the last year, its revenue is up 5.3%.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Inspired Energy PLC Been A Good Investment?

Inspired Energy PLC has generated a total shareholder return of 6.9% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.

In Summary...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Inspired Energy (1 is potentially serious!) that you should be aware of before investing here.

Important note: Inspired Energy is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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