UK Markets open in 5 hrs 15 mins
  • NIKKEI 225

    27,692.50
    -60.87 (-0.22%)
     
  • HANG SENG

    23,492.77
    -296.16 (-1.24%)
     
  • CRUDE OIL

    66.93
    +0.43 (+0.65%)
     
  • GOLD FUTURES

    1,771.70
    +9.00 (+0.51%)
     
  • DOW

    34,639.79
    +617.75 (+1.82%)
     
  • BTC-GBP

    42,403.02
    -752.25 (-1.74%)
     
  • CMC Crypto 200

    1,432.71
    -6.17 (-0.43%)
     
  • Nasdaq

    15,381.32
    +127.27 (+0.83%)
     
  • ^FTAS

    4,063.89
    -25.30 (-0.62%)
     

Why We Think ITM Power Plc's (LON:ITM) CEO Compensation Is Not Excessive At All

  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

The performance at ITM Power Plc (LON:ITM) has been rather lacklustre of late and shareholders may be wondering what CEO Graham Cooley is planning to do about this. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 29 October 2021. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

Check out our latest analysis for ITM Power

How Does Total Compensation For Graham Cooley Compare With Other Companies In The Industry?

Our data indicates that ITM Power Plc has a market capitalization of UK£2.5b, and total annual CEO compensation was reported as UK£500k for the year to April 2021. That's a notable increase of 45% on last year. In particular, the salary of UK£311.0k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations ranging from UK£1.5b to UK£4.6b, the reported median CEO total compensation was UK£1.4m. In other words, ITM Power pays its CEO lower than the industry median. Furthermore, Graham Cooley directly owns UK£3.3m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2021

2020

Proportion (2021)

Salary

UK£311k

UK£214k

62%

Other

UK£189k

UK£132k

38%

Total Compensation

UK£500k

UK£346k

100%

On an industry level, around 61% of total compensation represents salary and 39% is other remuneration. There isn't a significant difference between ITM Power and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ceo-compensation

ITM Power Plc's Growth

Over the last three years, ITM Power Plc has shrunk its earnings per share by 37% per year. Its revenue is up 12% over the last year.

The decline in EPS is a bit concerning. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has ITM Power Plc Been A Good Investment?

Boasting a total shareholder return of 1,940% over three years, ITM Power Plc has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean these strong returns may not continue. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

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 2 warning signs for ITM Power that investors should look into moving forward.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting