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

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.

Component	2021	2020	Proportion (2021)
Salary	R8.2m	R8.0m	44%
Other	R10m	R40m	56%
Total Compensation	R19m	R48m	100%

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.

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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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