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The CEO of Gem Diamonds Limited (LON:GEMD) is Clifford Elphick, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Gem Diamonds pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Gem Diamonds

Comparing Gem Diamonds Limited's CEO Compensation With the industry

According to our data, Gem Diamonds Limited has a market capitalization of UK£32m, and paid its CEO total annual compensation worth UK£913k over the year to December 2019. That's a notable decrease of 8.3% on last year. In particular, the salary of US$478.7k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below UK£159m, reported a median total CEO compensation of UK£165k. Hence, we can conclude that Clifford Elphick is remunerated higher than the industry median.

On an industry level, roughly 64% of total compensation represents salary and 36% is other remuneration. Gem Diamonds sets aside a smaller share of compensation for salary, in comparison to the overall industry. 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.

Gem Diamonds Limited's Growth

Over the past three years, Gem Diamonds Limited has seen its earnings per share (EPS) grow by 113% per year. It saw its revenue drop 32% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Gem Diamonds Limited Been A Good Investment?

With a three year total loss of 72% for the shareholders, Gem Diamonds Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we noted earlier, Gem Diamonds pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, the earnings per share growth is certainly impressive, but we cannot say the same about the uninspiring shareholder returns (over the last three years). Although we'd stop short of calling it inappropriate, we think Clifford is earning a very handsome sum.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 3 warning signs for Gem Diamonds that investors should be aware of in a dynamic business environment.

Important note: Gem Diamonds 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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