Increases to CEO Compensation Might Be Put On Hold For Now at Liberty Latin America Ltd. (NASDAQ:LILA)

In the past three years, the share price of Liberty Latin America Ltd. (NASDAQ:LILA) has struggled to grow and now shareholders are sitting on a loss. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 12 May 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Liberty Latin America

Comparing Liberty Latin America Ltd.'s CEO Compensation With the industry

Our data indicates that Liberty Latin America Ltd. has a market capitalization of US$3.3b, and total annual CEO compensation was reported as US$16m for the year to December 2020. Notably, that's an increase of 31% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.1m.

On examining similar-sized companies in the industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$1.6m. Hence, we can conclude that Balan Nair is remunerated higher than the industry median. Furthermore, Balan Nair directly owns US$14m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	US$1.1m	US$1.3m	7%
Other	US$15m	US$11m	93%
Total Compensation	US$16m	US$13m	100%

Talking in terms of the industry, salary represented approximately 24% of total compensation out of all the companies we analyzed, while other remuneration made up 76% of the pie. It's interesting to note that Liberty Latin America allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Liberty Latin America Ltd.'s Growth

Liberty Latin America Ltd.'s earnings per share (EPS) grew 23% per year over the last three years. Its revenue is down 2.6% over the previous year.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 Liberty Latin America Ltd. Been A Good Investment?

Few Liberty Latin America Ltd. shareholders would feel satisfied with the return of -33% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

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 2 warning signs for Liberty Latin America 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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