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We Take A Look At Why EROAD Limited's (NZSE:ERD) CEO Compensation Is Well Earned
It would be hard to discount the role that CEO Steven Newman has played in delivering the impressive results at EROAD Limited (NZSE:ERD) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 30 July 2021. This would also be a chance for them to hear the board review the financial results, discuss future company strategy and vote on any resolutions such as executive remuneration. Here is our take on why we think CEO compensation is not extravagant.
Check out our latest analysis for EROAD
Comparing EROAD Limited's CEO Compensation With the industry
At the time of writing, our data shows that EROAD Limited has a market capitalization of NZ$544m, and reported total annual CEO compensation of NZ$737k for the year to March 2021. Notably, that's a decrease of 29% over the year before. Notably, the salary which is NZ$603.0k, represents most of the total compensation being paid.
On comparing similar companies from the same industry with market caps ranging from NZ$287m to NZ$1.1b, we found that the median CEO total compensation was NZ$678k. So it looks like EROAD compensates Steven Newman in line with the median for the industry. Moreover, Steven Newman also holds NZ$847k worth of EROAD stock directly under their own name.
| Component | 2021 | 2020 | Proportion (2021) |
| Salary | NZ$603k | NZ$590k | 82% |
| Other | NZ$134k | NZ$450k | 18% |
| Total Compensation | NZ$737k | NZ$1.0m | 100% |
Talking in terms of the industry, salary represented approximately 66% of total compensation out of all the companies we analyzed, while other remuneration made up 34% of the pie. EROAD 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 EROAD Limited's Growth Numbers
Over the past three years, EROAD Limited has seen its earnings per share (EPS) grow by 98% per year. Its revenue is up 13% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. 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 EROAD Limited Been A Good Investment?
Boasting a total shareholder return of 103% over three years, EROAD Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary...
Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.
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 3 warning signs for EROAD that investors should look into moving forward.
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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Access Free AnalysisThis 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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About NZSE:ERD
EROAD
Provides electronic on-board units and software as a service to the transport industry in New Zealand, the United States, and Australia.
Adequate balance sheet and slightly overvalued.
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