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

Anglo American plc (LON:AAL) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 05 May 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Anglo American

Comparing Anglo American plc's CEO Compensation With the industry

Our data indicates that Anglo American plc has a market capitalization of UK£39b, and total annual CEO compensation was reported as US$11m for the year to December 2020. Notably, that's a decrease of 25% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.9m.

On comparing similar companies in the industry with market capitalizations above UK£5.7b, we found that the median total CEO compensation was US$3.3m. This suggests that Mark Cutifani is paid more than the median for the industry. What's more, Mark Cutifani holds UK£36m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	US$1.9m	US$1.8m	18%
Other	US$8.8m	US$12m	82%
Total Compensation	US$11m	US$14m	100%

On an industry level, around 64% of total compensation represents salary and 36% is other remuneration. In Anglo American's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Anglo American plc's Growth

Anglo American plc has reduced its earnings per share by 12% a year over the last three years. Its revenue is up 3.5% over the last year.

Overall this is not a very positive result for shareholders. 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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Anglo American plc Been A Good Investment?

We think that the total shareholder return of 105%, over three years, would leave most Anglo American plc shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 3 warning signs for Anglo American that investors should be aware of in a dynamic business environment.

Important note: Anglo American 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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