The results at Netcare Limited (JSE:NTC) have been quite disappointing recently and CEO Richard Friedland bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 03 February 2023. 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. We present the case why we think CEO compensation is out of sync with company performance.
Check out our latest analysis for Netcare
How Does Total Compensation For Richard Friedland Compare With Other Companies In The Industry?
According to our data, Netcare Limited has a market capitalization of R19b, and paid its CEO total annual compensation worth R14m over the year to September 2022. Notably, that's an increase of 32% over the year before. Notably, the salary which is R10.3m, represents most of the total compensation being paid.
In comparison with other companies in the South Africa Healthcare industry with market capitalizations ranging from R6.9b to R28b, the reported median CEO total compensation was R13m. From this we gather that Richard Friedland is paid around the median for CEOs in the industry. Furthermore, Richard Friedland directly owns R4.3m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 47% of total compensation represents salary and 53% is other remuneration. Netcare 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.
Netcare Limited's Growth
Over the last three years, Netcare Limited has shrunk its earnings per share by 26% per year. It achieved revenue growth of 2.1% over the last year.
Overall this is not a very positive result for shareholders. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Netcare Limited Been A Good Investment?
Since shareholders would have lost about 23% over three years, some Netcare Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to 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. That's why we did some digging and identified 2 warning signs for Netcare that you should be aware of before investing.
Switching gears from Netcare, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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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