Should Shareholders Reconsider Real Estate Investors plc's (LON:RLE) CEO Compensation Package?

Shareholders will probably not be too impressed with the underwhelming results at Real Estate Investors plc (LON:RLE) recently. At the upcoming AGM on 28 May 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Real Estate Investors

Comparing Real Estate Investors plc's CEO Compensation With the industry

According to our data, Real Estate Investors plc has a market capitalization of UK£68m, and paid its CEO total annual compensation worth UK£752k over the year to December 2020. Notably, that's a decrease of 33% over the year before. In particular, the salary of UK£550.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below UK£141m, we found that the median total CEO compensation was UK£674k. From this we gather that Paramjit Paul Bassi is paid around the median for CEOs in the industry. Furthermore, Paramjit Paul Bassi directly owns UK£4.6m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	UK£550k	UK£550k	73%
Other	UK£202k	UK£570k	27%
Total Compensation	UK£752k	UK£1.1m	100%

On an industry level, roughly 38% of total compensation represents salary and 62% is other remuneration. Real Estate Investors pays out 73% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Real Estate Investors plc's Growth Numbers

Over the last three years, Real Estate Investors plc has shrunk its earnings per share by 107% per year. It saw its revenue drop 1.0% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. 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 Real Estate Investors plc Been A Good Investment?

Since shareholders would have lost about 9.9% over three years, some Real Estate Investors plc investors would surely be feeling negative emotions. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Real Estate Investors you should be aware of, and 2 of them shouldn't be ignored.

Switching gears from Real Estate Investors, 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.

If you’re looking to trade Real Estate Investors, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.