Rajiv Bajaj has been the CEO of Bajaj Auto Limited (NSE:BAJAJ-AUTO) since 2005, 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 Bajaj Auto.
How Does Total Compensation For Rajiv Bajaj Compare With Other Companies In The Industry?
According to our data, Bajaj Auto Limited has a market capitalization of ₹1.2t, and paid its CEO total annual compensation worth ₹399m over the year to March 2020. That's a notable increase of 23% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at ₹91m.
In comparison with other companies in the industry with market capitalizations over ₹583b , the reported median total CEO compensation was ₹261m. Accordingly, our analysis reveals that Bajaj Auto Limited pays Rajiv Bajaj north of the industry median. Moreover, Rajiv Bajaj also holds ₹5.6b worth of Bajaj Auto 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 58% of total compensation represents salary, while the remainder of 42% is other remuneration. It's interesting to note that Bajaj Auto allocates a smaller portion of compensation to salary in comparison 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.
Bajaj Auto Limited's Growth
Over the past three years, Bajaj Auto Limited has seen its earnings per share (EPS) grow by 6.1% per year. In the last year, its revenue is down 14%.
We would prefer it if there was revenue growth, but the modest EPSgrowth gives us some relief. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 Bajaj Auto Limited Been A Good Investment?
Boasting a total shareholder return of 45% over three years, Bajaj Auto Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
As we touched on above, Bajaj Auto Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But shareholder returns have been positive for the last three years. That's why we were hoping EPS growth would match this growth, but sadly that is not the case. We'd ideally want to see higher EPS growth, but CEO compensation seems to be within reason, given high shareholder returns.
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 3 warning signs for Bajaj Auto that investors should look into moving forward.
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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