How Should Investors React To Chennai Petroleum's (NSE:CHENNPETRO) CEO Pay?

This article will reflect on the compensation paid to S. Pandey who has served as CEO of Chennai Petroleum Corporation Limited (NSE:CHENNPETRO) since 2018. This analysis will also assess whether Chennai Petroleum pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Chennai Petroleum

How Does Total Compensation For S. Pandey Compare With Other Companies In The Industry?

At the time of writing, our data shows that Chennai Petroleum Corporation Limited has a market capitalization of ₹18b, and reported total annual CEO compensation of ₹5.0m for the year to March 2020. We note that's a decrease of 15% compared to last year. In particular, the salary of ₹4.40m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between ₹7.3b and ₹29b had a median total CEO compensation of ₹11m. Accordingly, Chennai Petroleum pays its CEO under the industry median.

On an industry level, around 74% of total compensation represents salary and 26% is other remuneration. Chennai Petroleum is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Chennai Petroleum Corporation Limited's Growth

Over the last three years, Chennai Petroleum Corporation Limited has shrunk its earnings per share by 112% per year. It saw its revenue drop 29% over the last year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Chennai Petroleum Corporation Limited Been A Good Investment?

Given the total shareholder loss of 70% over three years, many shareholders in Chennai Petroleum Corporation 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...

As previously discussed, S. is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.

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. We did our research and identified 3 warning signs (and 2 which don't sit too well with us) in Chennai Petroleum we think you should know about.

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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