What Can We Learn About Geneva Finance's (NZSE:GFL) CEO Compensation?

David O'Connell has been the CEO of Geneva Finance Limited (NZSE:GFL) since 2008, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Geneva Finance

Comparing Geneva Finance Limited's CEO Compensation With the industry

At the time of writing, our data shows that Geneva Finance Limited has a market capitalization of NZ$40m, and reported total annual CEO compensation of NZ$566k for the year to March 2020. That's a notable decrease of 11% on last year. Notably, the salary which is NZ$516.0k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below NZ$279m, we found that the median total CEO compensation was NZ$1.1m. Accordingly, Geneva Finance pays its CEO under the industry median. Furthermore, David O'Connell directly owns NZ$210k worth of shares in the company.

On an industry level, around 44% of total compensation represents salary and 56% is other remuneration. Geneva Finance is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Geneva Finance Limited's Growth

Over the last three years, Geneva Finance Limited has shrunk its earnings per share by 4.9% per year. In the last year, its revenue is up 14%.

Few shareholders would be pleased to read that EPS have declined. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Geneva Finance Limited Been A Good Investment?

With a total shareholder return of 4.2% over three years, Geneva Finance Limited has done okay by shareholders. 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.

To Conclude...

As we touched on above, Geneva Finance Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Shareholder returns have been uninspiring, but EPS growth has arguably been worse, over the last three years. It's tough for us to say that David is earning a high compensation, but any bump in pay is unlikely at this stage since shareholders will likely hold off support until performance improves.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 4 warning signs (and 1 which is a bit concerning) in Geneva Finance we think you should know about.

Important note: Geneva Finance 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.

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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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