Why We Think Cochin Shipyard Limited's (NSE:COCHINSHIP) CEO Compensation Is Not Excessive At All

Key Insights

• Cochin Shipyard's Annual General Meeting to take place on 28th of September
• CEO Madhu Nair's total compensation includes salary of ₹5.74m
• Total compensation is 68% below industry average
• Cochin Shipyard's EPS declined by 13% over the past three years while total shareholder return over the past three years was 273%

Performance at Cochin Shipyard Limited (NSE:COCHINSHIP) has been rather uninspiring recently and shareholders may be wondering how CEO Madhu Nair plans to fix this. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 28th of September. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

Check out our latest analysis for Cochin Shipyard

How Does Total Compensation For Madhu Nair Compare With Other Companies In The Industry?

According to our data, Cochin Shipyard Limited has a market capitalization of ₹137b, and paid its CEO total annual compensation worth ₹8.3m over the year to March 2023. This means that the compensation hasn't changed much from last year. Notably, the salary which is ₹5.74m, represents most of the total compensation being paid.

For comparison, other companies in the Indian Machinery industry with market capitalizations ranging between ₹83b and ₹266b had a median total CEO compensation of ₹26m. That is to say, Madhu Nair is paid under the industry median. Moreover, Madhu Nair also holds ₹1.5m worth of Cochin Shipyard stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	₹5.7m	₹6.0m	69%
Other	₹2.6m	₹2.5m	31%
Total Compensation	₹8.3m	₹8.5m	100%

Speaking on an industry level, nearly 90% of total compensation represents salary, while the remainder of 10% is other remuneration. Cochin Shipyard sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Cochin Shipyard Limited's Growth Numbers

Over the last three years, Cochin Shipyard Limited has shrunk its earnings per share by 13% per year. It saw its revenue drop 27% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Cochin Shipyard Limited Been A Good Investment?

Boasting a total shareholder return of 273% over three years, Cochin Shipyard Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 2 warning signs for Cochin Shipyard (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Cochin Shipyard, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.