Most Shareholders Will Probably Agree With Godrej Consumer Products Limited's (NSE:GODREJCP) CEO Compensation

Key Insights

• Godrej Consumer Products' Annual General Meeting to take place on 7th of August
• Total pay for CEO Sudhir Sitapati includes ₹63.3m salary
• Total compensation is similar to the industry average
• Godrej Consumer Products' EPS declined by 19% over the past three years while total shareholder return over the past three years was 48%

Despite strong share price growth of 48% for Godrej Consumer Products Limited (NSE:GODREJCP) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 7th of August. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for Godrej Consumer Products

Comparing Godrej Consumer Products Limited's CEO Compensation With The Industry

According to our data, Godrej Consumer Products Limited has a market capitalization of ₹1.5t, and paid its CEO total annual compensation worth ₹190m over the year to March 2024. Notably, that's an increase of 32% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at ₹63m.

For comparison, other companies in the Indian Personal Products industry with market capitalizations above ₹670b, reported a median total CEO compensation of ₹155m. This suggests that Godrej Consumer Products remunerates its CEO largely in line with the industry average. Moreover, Sudhir Sitapati also holds ₹87m worth of Godrej Consumer Products stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	₹63m	₹58m	33%
Other	₹127m	₹86m	67%
Total Compensation	₹190m	₹144m	100%

Speaking on an industry level, nearly 95% of total compensation represents salary, while the remainder of 5% is other remuneration. In Godrej Consumer Products' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Godrej Consumer Products Limited's Growth Numbers

Over the last three years, Godrej Consumer Products Limited has shrunk its earnings per share by 19% per year. It achieved revenue growth of 5.9% over the last year.

Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Godrej Consumer Products Limited Been A Good Investment?

Boasting a total shareholder return of 48% over three years, Godrej Consumer Products Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

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. 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 1 warning sign for Godrej Consumer Products that you should be aware of before investing.

Important note: Godrej Consumer Products is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com