Here's Why Shareholders May Want To Be Cautious With Increasing Seeka Limited's (NZSE:SEK) CEO Pay Packet

Key Insights

• Seeka will host its Annual General Meeting on 16th of October
• Total pay for CEO Michael Franks includes NZ$734.0k salary
• The total compensation is similar to the average for the industry
• Over the past three years, Seeka's EPS fell by 108% and over the past three years, the total loss to shareholders 49%

In the past three years, the share price of Seeka Limited (NZSE:SEK) 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 16th of October 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 our take on why we think shareholders might be hesitant about approving a raise at the moment.

Check out our latest analysis for Seeka

Comparing Seeka Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Seeka Limited has a market capitalization of NZ$110m, and reported total annual CEO compensation of NZ$783k for the year to December 2023. That's a slight decrease of 4.0% on the prior year. Notably, the salary which is NZ$734.0k, represents most of the total compensation being paid.

For comparison, other companies in the New Zealander Food industry with market capitalizations below NZ$329m, reported a median total CEO compensation of NZ$880k. So it looks like Seeka compensates Michael Franks in line with the median for the industry. Furthermore, Michael Franks directly owns NZ$569k worth of shares in the company.

On an industry level, around 65% of total compensation represents salary and 35% is other remuneration. Seeka is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Seeka Limited's Growth Numbers

Over the last three years, Seeka Limited has shrunk its earnings per share by 108% per year. It achieved revenue growth of 19% over the last year.

The decrease in EPS could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. 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 Seeka Limited Been A Good Investment?

With a total shareholder return of -49% over three years, Seeka Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

The returns to shareholders is disappointing along with lack of earnings growth, which goes some way in explaining the poor returns. 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 is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Seeka (of which 1 is significant!) that you should know about in order to have a holistic understanding of the 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.