The results at Allied Electronics Corporation Limited (JSE:AEL) have been quite disappointing recently and CEO Mteto Nyati bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 28 July 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.
Comparing Allied Electronics Corporation Limited's CEO Compensation With the industry
At the time of writing, our data shows that Allied Electronics Corporation Limited has a market capitalization of R3.8b, and reported total annual CEO compensation of R23m for the year to February 2021. Notably, that's an increase of 60% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at R7.1m.
In comparison with other companies in the industry with market capitalizations ranging from R1.5b to R5.8b, the reported median CEO total compensation was R8.3m. This suggests that Mteto Nyati is paid more than the median for the industry. Moreover, Mteto Nyati also holds R5.5m worth of Allied Electronics stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, roughly 72% of total compensation represents salary and 28% is other remuneration. It's interesting to note that Allied Electronics allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Allied Electronics Corporation Limited's Growth
Over the last three years, Allied Electronics Corporation Limited has shrunk its earnings per share by 40% per year. In the last year, its revenue changed by just 0.3%.
Overall this is not a very positive result for shareholders. And the flat revenue is seriously uninspiring. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Allied Electronics Corporation Limited Been A Good Investment?
With a three year total loss of 19% for the shareholders, Allied Electronics Corporation Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
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.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for Allied Electronics that investors should look into moving forward.
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.
If you’re looking to trade a wide range of investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.