Here’s Why Shareholders Should Examine Air New Zealand Limited’s (NZSE:AIR) CEO Compensation Package More Closely

The results at Air New Zealand Limited (NZSE:AIR) have been quite disappointing recently and CEO Greg Foran 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 22 September 2022. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Air New Zealand

Comparing Air New Zealand Limited’s CEO Compensation With The Industry

According to our data, Air New Zealand Limited has a market capitalization of NZ$2.3b, and paid its CEO total annual compensation worth NZ$3.6m over the year to June 2022. That is, the compensation was roughly the same as last year. We think total compensation is more important but our data shows that the CEO salary is lower, at NZ$1.7m.

In comparison with other companies in the industry with market capitalizations ranging from NZ$1.7b to NZ$5.3b, the reported median CEO total compensation was NZ$3.6m. So it looks like Air New Zealand compensates Greg Foran in line with the median for the industry. What’s more, Greg Foran holds NZ$2.8m worth of shares in the company in their own name.

Talking in terms of the industry, salary represented approximately 32% of total compensation out of all the companies we analyzed, while other remuneration made up 68% of the pie. Air New Zealand pays out 46% of remuneration in the form of a salary, significantly higher than the industry average. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.

Air New Zealand Limited’s Growth

Air New Zealand Limited has reduced its earnings per share by 64% a year over the last three years. It achieved revenue growth of 8.7% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn’t enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn’t really justify a high pay packet 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 Air New Zealand Limited Been A Good Investment?

With a total shareholder return of -59% over three years, Air New Zealand Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude…

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 1 warning sign for Air New Zealand that investors should look into moving forward.

Switching gears from Air New Zealand, 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.