Why Balwin Properties' (JSE:BWN) CEO Pay Matters

This article will reflect on the compensation paid to Steve Brookes who has served as CEO of Balwin Properties Limited (JSE:BWN) since 1996. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Balwin Properties

How Does Total Compensation For Steve Brookes Compare With Other Companies In The Industry?

According to our data, Balwin Properties Limited has a market capitalization of R1.9b, and paid its CEO total annual compensation worth R7.6m over the year to February 2020. That's just a smallish increase of 7.4% on last year. Notably, the salary which is R5.33m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under R3.1b, the reported median total CEO compensation was R3.4m. Hence, we can conclude that Steve Brookes is remunerated higher than the industry median. Furthermore, Steve Brookes directly owns R675m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, around 70% of total compensation represents salary and 30% is other remuneration. Our data reveals that Balwin Properties allocates salary more or less in line with the wider market. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Balwin Properties Limited's Growth Numbers

Over the last three years, Balwin Properties Limited has shrunk its earnings per share by 14% per year. In the last year, its revenue is up 11%.

Overall this is not a very positive result for shareholders. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Balwin Properties Limited Been A Good Investment?

Since shareholders would have lost about 13% over three years, some Balwin Properties Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As we touched on above, Balwin Properties Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Disappointingly, share price gains over the last three years have failed to materialize. Arguably worse, we've been waiting for positive EPS growth for the last three years. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 5 warning signs for Balwin Properties (1 is a bit unpleasant!) that you should be aware of before investing here.

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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