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

The anaemic share price growth at NZME Limited (NZSE:NZM) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 16 April 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for NZME

How Does Total Compensation For Michael Boggs Compare With Other Companies In The Industry?

Our data indicates that NZME Limited has a market capitalization of NZ$164m, and total annual CEO compensation was reported as NZ$1.8m for the year to December 2020. Notably, that's an increase of 72% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at NZ$853k.

On comparing similar-sized companies in the industry with market capitalizations below NZ$284m, we found that the median total CEO compensation was NZ$751k. Accordingly, our analysis reveals that NZME Limited pays Michael Boggs north of the industry median. Furthermore, Michael Boggs directly owns NZ$896k worth of shares in the company.

Component	2020	2019	Proportion (2020)
Salary	NZ$853k	NZ$806k	48%
Other	NZ$923k	NZ$229k	52%
Total Compensation	NZ$1.8m	NZ$1.0m	100%

Talking in terms of the industry, salary represented approximately 69% of total compensation out of all the companies we analyzed, while other remuneration made up 31% of the pie. NZME 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.

NZME Limited's Growth

NZME Limited has reduced its earnings per share by 12% a year over the last three years. In the last year, its revenue is down 13%.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has NZME Limited Been A Good Investment?

NZME Limited has not done too badly by shareholders, with a total return of 3.8%, over three years. It would be nice to see that metric improve in the future. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

To Conclude...

The flat share price growth combined with the the fact that earnings have failed to grow makes us wonder whether the share price will have any further strong momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

Whatever your view on compensation, you might want to check if insiders are buying or selling NZME shares (free trial).

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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