Shareholders May Not Be So Generous With Blue Star Limited's (NSE:BLUESTARCO) CEO Compensation And Here's Why

The share price of Blue Star Limited (NSE:BLUESTARCO) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 04 August 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Blue Star

Comparing Blue Star Limited's CEO Compensation With the industry

Our data indicates that Blue Star Limited has a market capitalization of ₹80b, and total annual CEO compensation was reported as ₹50m for the year to March 2021. That's mostly flat as compared to the prior year's compensation. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹10m.

On examining similar-sized companies in the industry with market capitalizations between ₹30b and ₹119b, we discovered that the median CEO total compensation of that group was ₹35m. This suggests that B. Thiagarajan is paid more than the median for the industry. What's more, B. Thiagarajan holds ₹61m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	₹10m	₹10m	21%
Other	₹40m	₹41m	79%
Total Compensation	₹50m	₹52m	100%

Speaking on an industry level, all of total compensation represents salary, while non-salary remuneration is completely ignored. Blue Star 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.

Blue Star Limited's Growth

Blue Star Limited has reduced its earnings per share by 11% a year over the last three years. It saw its revenue drop 20% over the last 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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Blue Star Limited Been A Good Investment?

Blue Star Limited has generated a total shareholder return of 28% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 3 warning signs for Blue Star that you should be aware of before investing.

Switching gears from Blue Star, 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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