Should Shareholders Reconsider Finbond Group Limited's (JSE:FGL) CEO Compensation Package?

By
Simply Wall St
Published
July 24, 2021
JSE:FGL
Source: Shutterstock

The results at Finbond Group Limited (JSE:FGL) have been quite disappointing recently and CEO Willie Van Aardt bears some responsibility for this. At the upcoming AGM on 30 July 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Finbond Group

How Does Total Compensation For Willie Van Aardt Compare With Other Companies In The Industry?

According to our data, Finbond Group Limited has a market capitalization of R1.1b, and paid its CEO total annual compensation worth R46m over the year to February 2021. Notably, that's an increase of 8.1% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at R20m.

In comparison with other companies in the industry with market capitalizations under R3.0b, the reported median total CEO compensation was R7.4m. This suggests that Willie Van Aardt is paid more than the median for the industry.

Component20212020Proportion (2021)
Salary R20m R16m 43%
Other R26m R26m 57%
Total CompensationR46m R42m100%

On an industry level, around 56% of total compensation represents salary and 44% is other remuneration. Finbond Group pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
JSE:FGL CEO Compensation July 24th 2021

A Look at Finbond Group Limited's Growth Numbers

Finbond Group Limited has reduced its earnings per share by 123% a year over the last three years. It saw its revenue drop 29% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Finbond Group Limited Been A Good Investment?

Few Finbond Group Limited shareholders would feel satisfied with the return of -67% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Finbond Group (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

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. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.