Here's Why We Think Century Enka Limited's (NSE:CENTENKA) CEO Compensation Looks Fair for the time being

Key Insights

• Century Enka to hold its Annual General Meeting on 30th of August
• Salary of ₹20.7m is part of CEO Suresh Sodani's total remuneration
• The total compensation is similar to the average for the industry
• Over the past three years, Century Enka's EPS fell by 27% and over the past three years, the total shareholder return was 94%

Despite strong share price growth of 94% for Century Enka Limited (NSE:CENTENKA) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 30th of August may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Century Enka

How Does Total Compensation For Suresh Sodani Compare With Other Companies In The Industry?

Our data indicates that Century Enka Limited has a market capitalization of ₹17b, and total annual CEO compensation was reported as ₹27m for the year to March 2024. We note that's a decrease of 10% compared to last year. We note that the salary portion, which stands at ₹20.7m constitutes the majority of total compensation received by the CEO.

On comparing similar companies from the Indian Luxury industry with market caps ranging from ₹8.4b to ₹34b, we found that the median CEO total compensation was ₹23m. This suggests that Century Enka remunerates its CEO largely in line with the industry average.

On an industry level, roughly 99% of total compensation represents salary and 0.52221699% is other remuneration. Century Enka sets aside a smaller share of compensation for salary, in comparison to the overall industry. 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.

Century Enka Limited's Growth

Century Enka Limited has reduced its earnings per share by 27% a year over the last three years. Its revenue is down 4.6% over the previous year.

The decline in EPS is a bit concerning. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Century Enka Limited Been A Good Investment?

We think that the total shareholder return of 94%, over three years, would leave most Century Enka Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

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. That's why we did our research, and identified 3 warning signs for Century Enka (of which 1 is a bit concerning!) that you should know about in order to have a holistic understanding of the stock.

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. 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.