Despite REN - Redes Energéticas Nacionais, SGPS, S.A.'s (ELI:RENE) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 23 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. 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.
Comparing REN - Redes Energéticas Nacionais, SGPS, S.A.'s CEO Compensation With the industry
Our data indicates that REN - Redes Energéticas Nacionais, SGPS, S.A. has a market capitalization of €1.6b, and total annual CEO compensation was reported as €971k for the year to December 2020. We note that's an increase of 11% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €389k.
For comparison, other companies in the same industry with market capitalizations ranging between €835m and €2.7b had a median total CEO compensation of €1.0m. So it looks like REN - Redes Energéticas Nacionais SGPS compensates Rodrigo de Araújo Costa in line with the median for the industry.
On an industry level, roughly 35% of total compensation represents salary and 65% is other remuneration. According to our research, REN - Redes Energéticas Nacionais SGPS has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at REN - Redes Energéticas Nacionais, SGPS, S.A.'s Growth Numbers
REN - Redes Energéticas Nacionais, SGPS, S.A. has reduced its earnings per share by 4.6% a year over the last three years. In the last year, its revenue is down 3.7%.
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 REN - Redes Energéticas Nacionais, SGPS, S.A. Been A Good Investment?
REN - Redes Energéticas Nacionais, SGPS, S.A. has served shareholders reasonably well, with a total return of 15% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question 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.
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for REN - Redes Energéticas Nacionais SGPS 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. 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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