Stock Analysis

This Is Why Fletcher Building Limited's (NZSE:FBU) CEO Compensation Looks Appropriate

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Performance at Fletcher Building Limited (NZSE:FBU) has been reasonably good and CEO Ross Taylor has done a decent job of steering the company in the right direction. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 19 October 2021. We present our case of why we think CEO compensation looks fair.

Check out our latest analysis for Fletcher Building

Comparing Fletcher Building Limited's CEO Compensation With the industry

At the time of writing, our data shows that Fletcher Building Limited has a market capitalization of NZ$5.9b, and reported total annual CEO compensation of NZ$7.0m for the year to June 2021. That's a notable increase of 73% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at NZ$1.9m.

On comparing similar companies from the same industry with market caps ranging from NZ$2.9b to NZ$9.2b, we found that the median CEO total compensation was NZ$5.8m. This suggests that Fletcher Building remunerates its CEO largely in line with the industry average. What's more, Ross Taylor holds NZ$9.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary NZ$1.9m NZ$1.9m 27%
Other NZ$5.1m NZ$2.1m 73%
Total CompensationNZ$7.0m NZ$4.0m100%

Talking in terms of the industry, salary represented approximately 37% of total compensation out of all the companies we analyzed, while other remuneration made up 63% of the pie. Fletcher Building sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

NZSE:FBU CEO Compensation October 12th 2021

Fletcher Building Limited's Growth

Fletcher Building Limited's earnings per share (EPS) grew 3.4% per year over the last three years. Its revenue is up 11% over the last year.

We think the revenue growth is good. And the modest growth in EPS isn't bad, either. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Fletcher Building Limited Been A Good Investment?

With a total shareholder return of 29% over three years, Fletcher Building Limited shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, we still think that any proposed increase in CEO compensation will be examined closely to make sure the compensation is appropriate and linked to performance.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 2 warning signs for Fletcher Building that investors should be aware of in a dynamic business environment.

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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