Here's Why Shareholders May Want To Be Cautious With Increasing Ricardo plc's (LON:RCDO) CEO Pay Packet

Key Insights

• Ricardo's Annual General Meeting to take place on 14th of November
• CEO Tiemann Ritchie's total compensation includes salary of UK£491.0k
• The overall pay is 52% above the industry average
• Ricardo's EPS grew by 49% over the past three years while total shareholder return over the past three years was 6.4%

Performance at Ricardo plc (LON:RCDO) has been reasonably good and CEO Tiemann Ritchie has done a decent job of steering the company in the right direction. As shareholders go into the upcoming AGM on 14th of November, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders may still want to keep CEO compensation within reason.

See our latest analysis for Ricardo

How Does Total Compensation For Tiemann Ritchie Compare With Other Companies In The Industry?

Our data indicates that Ricardo plc has a market capitalization of UK£275m, and total annual CEO compensation was reported as UK£923k for the year to June 2024. Notably, that's an increase of 33% over the year before. In particular, the salary of UK£491.0k, makes up a fairly large portion of the total compensation being paid to the CEO.

On comparing similar companies from the British Professional Services industry with market caps ranging from UK£154m to UK£616m, we found that the median CEO total compensation was UK£608k. This suggests that Tiemann Ritchie is paid more than the median for the industry. What's more, Tiemann Ritchie holds UK£235k worth of shares in the company in their own name.

Component	2024	2023	Proportion (2024)
Salary	UK£491k	UK£477k	53%
Other	UK£432k	UK£218k	47%
Total Compensation	UK£923k	UK£695k	100%

On an industry level, around 64% of total compensation represents salary and 36% is other remuneration. In Ricardo's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Ricardo plc's Growth Numbers

Ricardo plc's earnings per share (EPS) grew 49% per year over the last three years. It achieved revenue growth of 6.6% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. 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 Ricardo plc Been A Good Investment?

Ricardo plc has not done too badly by shareholders, with a total return of 6.4%, over three years. It would be nice to see that metric improve in the future. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

To Conclude...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, if the board proposes to increase the compensation, some shareholders might have questions given that the CEO is already being paid higher than the industry.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 2 warning signs for Ricardo that investors should look into moving forward.

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.