It Looks Like Eicher Motors Limited's (NSE:EICHERMOT) CEO May Expect Their Salary To Be Put Under The Microscope

The results at Eicher Motors Limited (NSE:EICHERMOT) have been quite disappointing recently and CEO Siddhartha Lal bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 17 August 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for Eicher Motors

How Does Total Compensation For Siddhartha Lal Compare With Other Companies In The Industry?

Our data indicates that Eicher Motors Limited has a market capitalization of ₹748b, and total annual CEO compensation was reported as ₹211m for the year to March 2021. We note that's an increase of 9.9% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at ₹74m.

On comparing similar companies in the industry with market capitalizations above ₹595b, we found that the median total CEO compensation was ₹62m. Hence, we can conclude that Siddhartha Lal is remunerated higher than the industry median. Furthermore, Siddhartha Lal directly owns ₹8.1b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	₹74m	₹47m	35%
Other	₹137m	₹145m	65%
Total Compensation	₹211m	₹192m	100%

On an industry level, roughly 88% of total compensation represents salary and 12% is other remuneration. Eicher Motors pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Eicher Motors Limited's Growth Numbers

Over the last three years, Eicher Motors Limited has shrunk its earnings per share by 15% per year. In the last year, its revenue is down 4.6%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Eicher Motors Limited Been A Good Investment?

Since shareholders would have lost about 3.6% over three years, some Eicher Motors Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Eicher Motors that you should be aware of before investing.

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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