Should Shareholders Reconsider Merafe Resources Limited's (JSE:MRF) CEO Compensation Package?

The results at Merafe Resources Limited (JSE:MRF) have been quite disappointing recently and CEO Zanele Matlala bears some responsibility for this. At the upcoming AGM on 18 May 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Merafe Resources

How Does Total Compensation For Zanele Matlala Compare With Other Companies In The Industry?

According to our data, Merafe Resources Limited has a market capitalization of R1.7b, and paid its CEO total annual compensation worth R6.5m over the year to December 2020. Notably, that's a decrease of 28% over the year before. In particular, the salary of R5.24m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below R2.8b, reported a median total CEO compensation of R5.9m. This suggests that Merafe Resources remunerates its CEO largely in line with the industry average. Moreover, Zanele Matlala also holds R2.0m worth of Merafe Resources stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	R5.2m	R5.0m	81%
Other	R1.2m	R4.0m	19%
Total Compensation	R6.5m	R9.0m	100%

Talking in terms of the industry, salary represented approximately 61% of total compensation out of all the companies we analyzed, while other remuneration made up 39% of the pie. Merafe Resources is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Merafe Resources Limited's Growth

Merafe Resources Limited has reduced its earnings per share by 104% a year over the last three years. It saw its revenue drop 11% over the last year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Merafe Resources Limited Been A Good Investment?

With a total shareholder return of -47% over three years, Merafe Resources Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

Whatever your view on compensation, you might want to check if insiders are buying or selling Merafe Resources shares (free trial).

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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