Why CEAT's (NSE:CEATLTD) CEO Pay Matters

Anant Goenka became the CEO of CEAT Limited (NSE:CEATLTD) in 2012, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for CEAT

Comparing CEAT Limited's CEO Compensation With the industry

At the time of writing, our data shows that CEAT Limited has a market capitalization of ₹49b, and reported total annual CEO compensation of ₹56m for the year to March 2020. Notably, that's an increase of 18% over the year before. Notably, the salary which is ₹47.6m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations ranging from ₹29b to ₹117b, the reported median CEO total compensation was ₹36m. This suggests that Anant Goenka is paid more than the median for the industry. What's more, Anant Goenka holds ₹17m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 79% of total compensation out of all the companies we analyzed, while other remuneration made up 21% of the pie. Our data reveals that CEAT allocates salary more or less in line with the wider market. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at CEAT Limited's Growth Numbers

CEAT Limited's earnings per share (EPS) grew 3.3% per year over the last three years. In the last year, its revenue is down 7.2%.

We generally like to see a little revenue growth, but the modest EPSgrowth gives us some relief. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. 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 CEAT Limited Been A Good Investment?

Given the total shareholder loss of 37% over three years, many shareholders in CEAT Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As we touched on above, CEAT 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. Over the last three years, shareholder returns have been downright disappointing for CEAT, and although EPS growth is steady, it hasn't set the world on fire. And the situation doesn't look all that good when you see Anant is remunerated higher than the industry average. Taking all this into account, it could be hard to get shareholder support for giving Anant a raise.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 2 warning signs (and 1 which makes us a bit uncomfortable) in CEAT we think you should know about.

Switching gears from CEAT, 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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