David Richards became the CEO of Liontown Resources Limited (ASX:LTR) in 2010, 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 Liontown Resources.

Check out our latest analysis for Liontown Resources

How Does Total Compensation For David Richards Compare With Other Companies In The Industry?

Our data indicates that Liontown Resources Limited has a market capitalization of AU$485m, and total annual CEO compensation was reported as AU$556k for the year to June 2020. Notably, that's an increase of 42% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$243k.

In comparison with other companies in the industry with market capitalizations ranging from AU$272m to AU$1.1b, the reported median CEO total compensation was AU$955k. Accordingly, Liontown Resources pays its CEO under the industry median. What's more, David Richards holds AU$5.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 70% of total compensation represents salary, while the remainder of 30% is other remuneration. Liontown Resources sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Liontown Resources Limited's Growth

Over the last three years, Liontown Resources Limited has shrunk its earnings per share by 54% per year. It saw its revenue drop 63% over the last year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Liontown Resources Limited Been A Good Investment?

Boasting a total shareholder return of 890% over three years, Liontown Resources Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude…

As previously discussed, David is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. And although the company is suffering from declining EPS growth over the past three years, shareholder returns remain strong. Although we'd like to see positive EPS growth, we'd argue the remuneration is modest, based on our observations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 4 warning signs for Liontown Resources you should be aware of, and 2 of them can't be ignored.

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. 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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