We Discuss Why Fairchem Organics Limited's (NSE:FAIRCHEMOR) CEO Compensation May Be Closely Reviewed

Key Insights

• Fairchem Organics will host its Annual General Meeting on 5th of August
• Salary of ₹16.6m is part of CEO Nahoosh Jariwala's total remuneration
• Total compensation is 34% above industry average
• Fairchem Organics' three-year loss to shareholders was 27% while its EPS was down 1.6% over the past three years

Fairchem Organics Limited (NSE:FAIRCHEMOR) has not performed well recently and CEO Nahoosh Jariwala will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 5th of August. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Fairchem Organics

Comparing Fairchem Organics Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Fairchem Organics Limited has a market capitalization of ₹18b, and reported total annual CEO compensation of ₹30m for the year to March 2024. That's a notable increase of 21% on last year. In particular, the salary of ₹16.6m, makes up a fairly large portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the Indian Chemicals industry with market capitalizations between ₹8.4b and ₹33b, we discovered that the median CEO total compensation of that group was ₹22m. Hence, we can conclude that Nahoosh Jariwala is remunerated higher than the industry median.

Component	2024	2023	Proportion (2024)
Salary	₹17m	₹20m	56%
Other	₹13m	₹4.1m	44%
Total Compensation	₹30m	₹25m	100%

Talking in terms of the industry, salary represented approximately 86% of total compensation out of all the companies we analyzed, while other remuneration made up 14% of the pie. It's interesting to note that Fairchem Organics allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Fairchem Organics Limited's Growth

Over the last three years, Fairchem Organics Limited has shrunk its earnings per share by 1.6% per year. In the last year, its revenue is down 4.1%.

The lack of EPS growth is certainly uninspiring. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Fairchem Organics Limited Been A Good Investment?

With a three year total loss of 27% for the shareholders, Fairchem Organics Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

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 2 warning signs (and 1 which can't be ignored) in Fairchem Organics we think you should know about.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.

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