How Should Investors Feel About Menon Bearings' (NSE:MENONBE) CEO Remuneration?

This article will reflect on the compensation paid to Nitin Menon who has served as CEO of Menon Bearings Limited (NSE:MENONBE) since 2000. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Menon Bearings.

See our latest analysis for Menon Bearings

How Does Total Compensation For Nitin Menon Compare With Other Companies In The Industry?

Our data indicates that Menon Bearings Limited has a market capitalization of ₹2.7b, and total annual CEO compensation was reported as ₹10m for the year to March 2020. This means that the compensation hasn't changed much from last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹10m.

In comparison with other companies in the industry with market capitalizations under ₹15b, the reported median total CEO compensation was ₹11m. So it looks like Menon Bearings compensates Nitin Menon in line with the median for the industry. Moreover, Nitin Menon also holds ₹972m worth of Menon Bearings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 79% of total compensation represents salary and 21% is other remuneration. At the company level, Menon Bearings pays Nitin Menon solely through a salary, preferring to go down a conventional route. 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 Menon Bearings Limited's Growth Numbers

Over the last three years, Menon Bearings Limited has shrunk its earnings per share by 14% per year. Its revenue is down 22% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Menon Bearings Limited Been A Good Investment?

Given the total shareholder loss of 46% over three years, many shareholders in Menon Bearings Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

Menon Bearings rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we touched on above, Menon Bearings Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for Menon Bearings that investors should be aware of in a dynamic business environment.

Switching gears from Menon Bearings, 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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