We Take A Look At Why African Rainbow Minerals Limited's (JSE:ARI) CEO Has Earned Their Pay Packet

By
Simply Wall St
Published
November 28, 2021
JSE:ARI
Source: Shutterstock

It would be hard to discount the role that CEO Mike Schmidt has played in delivering the impressive results at African Rainbow Minerals Limited (JSE:ARI) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 06 December 2021. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. Here is our take on why we think CEO compensation is not extravagant.

View our latest analysis for African Rainbow Minerals

How Does Total Compensation For Mike Schmidt Compare With Other Companies In The Industry?

At the time of writing, our data shows that African Rainbow Minerals Limited has a market capitalization of R37b, and reported total annual CEO compensation of R19m for the year to June 2021. That's a notable decrease of 61% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at R8.2m.

In comparison with other companies in the industry with market capitalizations ranging from R16b to R52b, the reported median CEO total compensation was R22m. This suggests that African Rainbow Minerals remunerates its CEO largely in line with the industry average. Furthermore, Mike Schmidt directly owns R91m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary R8.2m R8.0m 44%
Other R10m R40m 56%
Total CompensationR19m R48m100%

On an industry level, roughly 67% of total compensation represents salary and 33% is other remuneration. African Rainbow Minerals sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
JSE:ARI CEO Compensation November 29th 2021

African Rainbow Minerals Limited's Growth

African Rainbow Minerals Limited has seen its earnings per share (EPS) increase by 37% a year over the past three years. It achieved revenue growth of 69% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. 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 African Rainbow Minerals Limited Been A Good Investment?

Most shareholders would probably be pleased with African Rainbow Minerals Limited for providing a total return of 115% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for African Rainbow Minerals (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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.