How Should Investors Feel About Rand Merchant Investment Holdings' (JSE:RMI) CEO Remuneration?

Herman Bosman has been the CEO of Rand Merchant Investment Holdings Limited (JSE:RMI) since 2014, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Rand Merchant Investment Holdings pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Rand Merchant Investment Holdings

Comparing Rand Merchant Investment Holdings Limited's CEO Compensation With the industry

According to our data, Rand Merchant Investment Holdings Limited has a market capitalization of R50b, and paid its CEO total annual compensation worth R12m over the year to June 2020. Notably, that's an increase of 15% over the year before. In particular, the salary of R8.46m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies from the same industry with market caps ranging from R30b to R97b, we found that the median CEO total compensation was R39m. That is to say, Herman Bosman is paid under the industry median. Furthermore, Herman Bosman directly owns R26m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 63% of total compensation represents salary, while the remainder of 37% is other remuneration. Rand Merchant Investment Holdings is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Rand Merchant Investment Holdings Limited's Growth Numbers

Over the last three years, Rand Merchant Investment Holdings Limited has shrunk its earnings per share by 25% per year. Its revenue is up 3.8% over the last year.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Rand Merchant Investment Holdings Limited Been A Good Investment?

Since shareholders would have lost about 24% over three years, some Rand Merchant Investment Holdings Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As previously discussed, Herman is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 2 warning signs for Rand Merchant Investment Holdings that investors should be aware of in a dynamic business environment.

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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