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

The underwhelming share price performance of Actual Experience plc (LON:ACT) 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 29 March 2021. They could also influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Actual Experience

How Does Total Compensation For Dave Page Compare With Other Companies In The Industry?

At the time of writing, our data shows that Actual Experience plc has a market capitalization of UK£69m, and reported total annual CEO compensation of UK£155k for the year to September 2020. This means that the compensation hasn't changed much from last year. We note that the salary portion, which stands at UK£147.5k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below UK£144m, we found that the median total CEO compensation was UK£216k. So it looks like Actual Experience compensates Dave Page in line with the median for the industry. What's more, Dave Page holds UK£2.3m 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	UK£148k	UK£150k	95%
Other	UK£7.5k	UK£4.2k	5%
Total Compensation	UK£155k	UK£154k	100%

Speaking on an industry level, nearly 70% of total compensation represents salary, while the remainder of 30% is other remuneration. Actual Experience pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Actual Experience plc's Growth

Actual Experience plc has seen its earnings per share (EPS) increase by 17% a year over the past three years. In the last year, its revenue is up 1.4%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Actual Experience plc Been A Good Investment?

The return of -55% over three years would not have pleased Actual Experience plc shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Actual Experience pays its CEO a majority of compensation through a salary. Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. 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 5 warning signs for Actual Experience you should be aware of, and 2 of them shouldn't be ignored.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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