Shareholders Will Probably Hold Off On Increasing The a2 Milk Company Limited's (NZSE:ATM) CEO Compensation For The Time Being

Key Insights

• a2 Milk will host its Annual General Meeting on 22nd of November
• CEO David Bortolussi's total compensation includes salary of NZ$1.93m
• The total compensation is 851% higher than the average for the industry
• Over the past three years, a2 Milk's EPS grew by 29% and over the past three years, the total loss to shareholders 18%

In the past three years, the share price of The a2 Milk Company Limited (NZSE:ATM) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 22nd of November could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for a2 Milk

Comparing The a2 Milk Company Limited's CEO Compensation With The Industry

Our data indicates that The a2 Milk Company Limited has a market capitalization of NZ$3.9b, and total annual CEO compensation was reported as NZ$6.0m for the year to June 2024. That is, the compensation was roughly the same as 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 New Zealander Food industry with market caps ranging from NZ$1.7b to NZ$5.5b, we found that the median CEO total compensation was NZ$632k. Hence, we can conclude that David Bortolussi is remunerated higher than the industry median. Furthermore, David Bortolussi directly owns NZ$6.8m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	NZ$1.9m	NZ$2.0m	32%
Other	NZ$4.1m	NZ$3.8m	68%
Total Compensation	NZ$6.0m	NZ$5.8m	100%

On an industry level, roughly 48% of total compensation represents salary and 52% is other remuneration. In a2 Milk's case, non-salary compensation represents a greater slice of total remuneration, 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.

The a2 Milk Company Limited's Growth

Over the past three years, The a2 Milk Company Limited has seen its earnings per share (EPS) grow by 29% per year. In the last year, its revenue is up 5.2%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. 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 The a2 Milk Company Limited Been A Good Investment?

With a three year total loss of 18% for the shareholders, The a2 Milk Company Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders 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.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for a2 Milk that investors should think about before committing capital to this stock.

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. 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.