Here's Why Hexagon Composites ASA's (OB:HEX) CEO Compensation Is The Least Of Shareholders' Concerns

The share price of Hexagon Composites ASA (OB:HEX) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. The upcoming AGM on 28 April 2021 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 Hexagon Composites

How Does Total Compensation For Jon Engeset Compare With Other Companies In The Industry?

Our data indicates that Hexagon Composites ASA has a market capitalization of kr8.9b, and total annual CEO compensation was reported as kr8.0m for the year to December 2020. Notably, that's an increase of 17% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at kr3.7m.

On examining similar-sized companies in the industry with market capitalizations between kr3.3b and kr13b, we discovered that the median CEO total compensation of that group was kr7.8m. From this we gather that Jon Engeset is paid around the median for CEOs in the industry. What's more, Jon Engeset holds kr12m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	kr3.7m	kr3.6m	46%
Other	kr4.3m	kr3.2m	54%
Total Compensation	kr8.0m	kr6.8m	100%

Talking in terms of the industry, salary represented approximately 52% of total compensation out of all the companies we analyzed, while other remuneration made up 48% of the pie. It's interesting to note that Hexagon Composites allocates a smaller portion of compensation to salary 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 Hexagon Composites ASA's Growth Numbers

Hexagon Composites ASA has reduced its earnings per share by 51% a year over the last three years. It saw its revenue drop 9.8% over the last year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Hexagon Composites ASA Been A Good Investment?

We think that the total shareholder return of 151%, over three years, would leave most Hexagon Composites ASA shareholders smiling. 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...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. 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 can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Hexagon Composites that you should be aware of before investing.

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.

If you’re looking to trade Hexagon Composites, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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