Should Shareholders Reconsider Tower Limited's (NZSE:TWR) CEO Compensation Package?

Key Insights

• Tower's Annual General Meeting to take place on 27th of February
• Salary of NZ$650.0k is part of CEO Blair Turnbull's total remuneration
• The overall pay is 34% above the industry average
• Tower's EPS declined by 0.6% over the past three years while total shareholder loss over the past three years was 4.1%

Tower Limited (NZSE:TWR) has not performed well recently and CEO Blair Turnbull will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 27th of February. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Tower

How Does Total Compensation For Blair Turnbull Compare With Other Companies In The Industry?

At the time of writing, our data shows that Tower Limited has a market capitalization of NZ$228m, and reported total annual CEO compensation of NZ$650k for the year to September 2022. This was the same amount the CEO received in the prior year. Notably, the salary of NZ$650k is the entirety of the CEO compensation.

In comparison with other companies in the New Zealand Insurance industry with market capitalizations under NZ$320m, the reported median total CEO compensation was NZ$485k. This suggests that Blair Turnbull is paid more than the median for the industry. Moreover, Blair Turnbull also holds NZ$153k worth of Tower stock directly under their own name.

Component	2022	2021	Proportion (2022)
Salary	NZ$650k	NZ$650k	100%
Other	-	-	-
Total Compensation	NZ$650k	NZ$650k	100%

Talking in terms of the industry, salary represented approximately 39% of total compensation out of all the companies we analyzed, while other remuneration made up 61% of the pie. At the company level, Tower pays Blair Turnbull solely through a salary, preferring to go down a conventional route. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Tower Limited's Growth

Tower Limited saw earnings per share stay pretty flat over the last three years. In the last year, its revenue is up 7.3%.

Its a bit disappointing to see that the company has failed to grow its EPS. The fairly low revenue growth fails to impress given that the EPS is down. 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 Tower Limited Been A Good Investment?

With a three year total loss of 4.1% for the shareholders, Tower Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Tower rewards its CEO solely through a salary, ignoring non-salary benefits completely. Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

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 did our research and spotted 2 warning signs for Tower that investors should look into moving forward.

Switching gears from Tower, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.