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

Key Insights

• Meridian Energy's Annual General Meeting to take place on 11th of October
• CEO Neal Barclay's total compensation includes salary of NZ$1.14m
• The total compensation is 94% higher than the average for the industry
• Over the past three years, Meridian Energy's EPS fell by 19% and over the past three years, the total shareholder return was 12%

Despite positive share price growth of 12% for Meridian Energy Limited (NZSE:MEL) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 11th of October. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

View our latest analysis for Meridian Energy

How Does Total Compensation For Neal Barclay Compare With Other Companies In The Industry?

Our data indicates that Meridian Energy Limited has a market capitalization of NZ$13b, and total annual CEO compensation was reported as NZ$1.9m for the year to June 2023. We note that's a decrease of 12% compared to last year. Notably, the salary which is NZ$1.14m, represents most of the total compensation being paid.

On comparing similar companies from the New Zealand Renewable Energy industry with market caps ranging from NZ$6.7b to NZ$20b, we found that the median CEO total compensation was NZ$966k. This suggests that Neal Barclay is paid more than the median for the industry. What's more, Neal Barclay holds NZ$2.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	NZ$1.1m	NZ$1.1m	61%
Other	NZ$738k	NZ$1.0m	39%
Total Compensation	NZ$1.9m	NZ$2.1m	100%

On an industry level, around 64% of total compensation represents salary and 36% is other remuneration. Meridian Energy is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Meridian Energy Limited's Growth

Over the last three years, Meridian Energy Limited has shrunk its earnings per share by 19% per year. In the last year, its revenue is down 15%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Meridian Energy Limited Been A Good Investment?

With a total shareholder return of 12% over three years, Meridian Energy Limited shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Meridian Energy (1 is a bit concerning!) that you should be aware of before investing here.

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. 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.