What Can We Learn About Hargreaves Services' (LON:HSP) CEO Compensation?

Gordon Frank Banham has been the CEO of Hargreaves Services Plc (LON:HSP) since 2001, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Hargreaves Services.

View our latest analysis for Hargreaves Services

How Does Total Compensation For Gordon Frank Banham Compare With Other Companies In The Industry?

At the time of writing, our data shows that Hargreaves Services Plc has a market capitalization of UK£85m, and reported total annual CEO compensation of UK£641k for the year to May 2020. That is, the compensation was roughly the same as last year. We note that the salary portion, which stands at UK£470.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below UK£147m, we found that the median total CEO compensation was UK£268k. Hence, we can conclude that Gordon Frank Banham is remunerated higher than the industry median. Moreover, Gordon Frank Banham also holds UK£7.3m worth of Hargreaves Services stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 64% of total compensation represents salary, while the remainder of 36% is other remuneration. Hargreaves Services is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Hargreaves Services Plc's Growth Numbers

Over the last three years, Hargreaves Services Plc has shrunk its earnings per share by 9.0% per year. It saw its revenue drop 27% over the last year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Hargreaves Services Plc Been A Good Investment?

With a three year total loss of 14% for the shareholders, Hargreaves Services Plc would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As previously discussed, Gordon Frank is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. What's equally worrying is that the company isn't growing by our analysis. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing 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 3 warning signs for Hargreaves Services that you should be aware of before investing.

Important note: Hargreaves Services 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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