It May Be Possible That Contact Energy Limited's (NZSE:CEN) CEO Compensation Could Get Bumped Up

Key Insights

• Contact Energy to hold its Annual General Meeting on 13th of November
• Salary of NZ$1.24m is part of CEO Mike Fuge's total remuneration
• The total compensation is 44% less than the average for the industry
• Contact Energy's EPS grew by 5.2% over the past three years while total shareholder return over the past three years was 25%

The decent performance at Contact Energy Limited (NZSE:CEN) recently will please most shareholders as they go into the AGM coming up on 13th of November. They will probably be more interested in hearing the board discuss future initiatives to further improve the business as they vote on resolutions such as executive remuneration. Here is our take on why we think CEO compensation is fair and may even warrant a raise.

View our latest analysis for Contact Energy

How Does Total Compensation For Mike Fuge Compare With Other Companies In The Industry?

According to our data, Contact Energy Limited has a market capitalization of NZ$6.8b, and paid its CEO total annual compensation worth NZ$2.4m over the year to June 2024. We note that's an increase of 14% above last year. In particular, the salary of NZ$1.24m, makes up a fairly large portion of the total compensation being paid to the CEO.

On comparing similar companies from the New Zealand Electric Utilities industry with market caps ranging from NZ$3.4b to NZ$11b, we found that the median CEO total compensation was NZ$4.3m. That is to say, Mike Fuge is paid under the industry median. Furthermore, Mike Fuge directly owns NZ$1.0m worth of shares in the company.

Component	2024	2023	Proportion (2024)
Salary	NZ$1.2m	NZ$1.2m	51%
Other	NZ$1.2m	NZ$931k	49%
Total Compensation	NZ$2.4m	NZ$2.1m	100%

Speaking on an industry level, nearly 33% of total compensation represents salary, while the remainder of 67% is other remuneration. Contact Energy is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Contact Energy Limited's Growth Numbers

Over the past three years, Contact Energy Limited has seen its earnings per share (EPS) grow by 5.2% per year. It achieved revenue growth of 35% over the last year.

It's hard to interpret the strong revenue growth as anything other than a positive. And in that context, the modest EPS improvement certainly isn't shabby. So while we'd stop short of saying growth is absolutely outstanding, there are definitely some clear positives! 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 Contact Energy Limited Been A Good Investment?

Contact Energy Limited has served shareholders reasonably well, with a total return of 25% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

While the company seems to be headed in the right direction performance-wise, there's always room for improvement. If it continues on the same road, shareholders might feel even more confident about their investment, and have little to no objections concerning CEO pay. Rather, investors would more likely want to engage on discussions related to key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Contact Energy 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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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.