Shareholders Will Probably Hold Off On Increasing Tejas Networks Limited's (NSE:TEJASNET) CEO Compensation For The Time Being

In the past three years, the share price of Tejas Networks Limited (NSE:TEJASNET) has struggled to grow and now shareholders are sitting on a loss. Per share earnings growth is also lacking, despite revenue growth. The AGM coming up on 25 June 2021 will be an opportunity for shareholders to have their concerns addressed by the board and for them to exercise their influence on management through voting on resolutions such as executive remuneration. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

See our latest analysis for Tejas Networks

How Does Total Compensation For Sanjay Nayak Compare With Other Companies In The Industry?

At the time of writing, our data shows that Tejas Networks Limited has a market capitalization of ₹16b, and reported total annual CEO compensation of ₹17m for the year to March 2021. Notably, that's a decrease of 23% over the year before. In particular, the salary of ₹16.2m, 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 ₹7.4b and ₹30b had a median total CEO compensation of ₹17m. So it looks like Tejas Networks compensates Sanjay Nayak in line with the median for the industry. Moreover, Sanjay Nayak also holds ₹465m worth of Tejas Networks stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	₹16m	₹18m	94%
Other	₹1.0m	₹4.3m	6%
Total Compensation	₹17m	₹22m	100%

Speaking on an industry level, nearly 80% of total compensation represents salary, while the remainder of 20% is other remuneration. According to our research, Tejas Networks has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Tejas Networks Limited's Growth

Tejas Networks Limited has reduced its earnings per share by 31% a year over the last three years. In the last year, its revenue is up 33%.

The decrease in EPS could be a concern for some investors. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Tejas Networks Limited Been A Good Investment?

Few Tejas Networks Limited shareholders would feel satisfied with the return of -43% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The company's earnings haven't grown and possibly because of that, the stock has performed poorly, resulting in a loss for the company's shareholders. Shareholders will get the chance at the upcoming AGM to question the board on key matters, such as CEO remuneration or any other issues they might 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. We did our research and spotted 1 warning sign for Tejas Networks that investors should look into moving forward.

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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