How Should Investors React To Methanex's (TSE:MX) CEO Pay?

Simply Wall St
·4-min read

This article will reflect on the compensation paid to John Floren who has served as CEO of Methanex Corporation (TSE:MX) since 2013. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Methanex.

See our latest analysis for Methanex

How Does Total Compensation For John Floren Compare With Other Companies In The Industry?

At the time of writing, our data shows that Methanex Corporation has a market capitalization of CA$3.1b, and reported total annual CEO compensation of CA$5.9m for the year to December 2019. We note that's a decrease of 8.8% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at CA$952k.

For comparison, other companies in the same industry with market capitalizations ranging between CA$1.3b and CA$4.3b had a median total CEO compensation of CA$7.2m. So it looks like Methanex compensates John Floren in line with the median for the industry. What's more, John Floren holds CA$5.0m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2019

2018

Proportion (2019)

Salary

CA$952k

CA$842k

16%

Other

CA$5.0m

CA$5.6m

84%

Total Compensation

CA$5.9m

CA$6.5m

100%

Talking in terms of the broader industry, salary and other compensation roughly make up 50% each, of the total compensation. In Methanex's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

A Look at Methanex Corporation's Growth Numbers

Over the last three years, Methanex Corporation has shrunk its earnings per share by 49% per year. In the last year, its revenue is down 31%.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Methanex Corporation Been A Good Investment?

Since shareholders would have lost about 32% over three years, some Methanex Corporation investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As we touched on above, Methanex Corporation is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which makes us a bit uncomfortable) in Methanex we think you should know about.

Important note: Methanex is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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