Increases to Gem Diamonds Limited's (LON:GEMD) CEO Compensation Might Cool off for now

The underwhelming share price performance of Gem Diamonds Limited (LON:GEMD) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 02 June 2021. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Gem Diamonds

How Does Total Compensation For Clifford Elphick Compare With Other Companies In The Industry?

At the time of writing, our data shows that Gem Diamonds Limited has a market capitalization of UK£97m, and reported total annual CEO compensation of US$1.3m for the year to December 2020. That's a notable increase of 10% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$645k.

For comparison, other companies in the industry with market capitalizations below UK£142m, reported a median total CEO compensation of US$221k. Hence, we can conclude that Clifford Elphick is remunerated higher than the industry median.

Component	2020	2019	Proportion (2020)
Salary	US$645k	US$634k	49%
Other	US$658k	US$547k	51%
Total Compensation	US$1.3m	US$1.2m	100%

Talking in terms of the industry, salary represented approximately 63% of total compensation out of all the companies we analyzed, while other remuneration made up 38% of the pie. Gem Diamonds pays a modest slice of remuneration through salary, as compared 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 Gem Diamonds Limited's Growth Numbers

Over the past three years, Gem Diamonds Limited has seen its earnings per share (EPS) grow by 45% per year. Its revenue is up 4.2% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Gem Diamonds Limited Been A Good Investment?

With a total shareholder return of -36% over three years, Gem Diamonds Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 3 warning signs for Gem Diamonds you should be aware of, and 1 of them makes us a bit uncomfortable.

Switching gears from Gem Diamonds, 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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