Kenichi Ayukawa became the CEO of Maruti Suzuki India Limited (NSE:MARUTI) in 2013, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Maruti Suzuki India.
Comparing Maruti Suzuki India Limited’s CEO Compensation With the industry
Our data indicates that Maruti Suzuki India Limited has a market capitalization of ₹2.3t, and total annual CEO compensation was reported as ₹47m for the year to March 2020. We note that’s a small decrease of 7.1% on last year. Notably, the salary which is ₹32.4m, represents most of the total compensation being paid.
On comparing similar companies in the industry with market capitalizations above ₹583b, we found that the median total CEO compensation was ₹261m. That is to say, Kenichi Ayukawa is paid under the industry median.
Speaking on an industry level, nearly 58% of total compensation represents salary, while the remainder of 42% is other remuneration. Maruti Suzuki India pays out 70% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Maruti Suzuki India Limited’s Growth
Maruti Suzuki India Limited has reduced its earnings per share by 17% a year over the last three years. It saw its revenue drop 18% over the last year.
The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. 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 Maruti Suzuki India Limited Been A Good Investment?
Given the total shareholder loss of 14% over three years, many shareholders in Maruti Suzuki India Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
As we touched on above, Maruti Suzuki India Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. EPS growth has failed to impress us, and the same can be said about shareholder returns. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.
CEO compensation can have a massive impact on performance, but it’s just one element. That’s why we did some digging and identified 2 warning signs for Maruti Suzuki India that you should be aware of before investing.
Switching gears from Maruti Suzuki India, 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. 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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