In 2004, Lino Saputo was appointed CEO of Saputo Inc. (TSE:SAP). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does Lino Saputo’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Saputo Inc. has a market cap of CA$14b, and reported total annual CEO compensation of CA$3.6m for the year to March 2019. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at CA$1.3m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We took a group of companies with market capitalizations over CA$11b, and calculated the median CEO total compensation to be CA$9.4m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Saputo stands. On a sector level, around 48% of total compensation represents salary and 52% is other remuneration. So it seems like there isn’t a significant difference between Saputo and the broader market, in terms of salary allocation in the overall compensation package.
This would give shareholders a good impression of the company, since most large companies pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance. The graphic below shows how CEO compensation at Saputo has changed from year to year.
Is Saputo Inc. Growing?
On average over the last three years, Saputo Inc. has shrunk earnings per share by 2.1% each year (measured with a line of best fit). It achieved revenue growth of 11% over the last year.
Unfortunately there is a complete lack of earnings per share improvement, over three years. There’s no doubt that the silver lining is that revenue is up. But it isn’t sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.
Has Saputo Inc. Been A Good Investment?
With a three year total loss of 14%, Saputo Inc. would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.
It looks like Saputo Inc. pays its CEO less than the average at large companies.
Shareholders should note that compensation for Lino Saputo is below the median of larger companies. But then, EPS growth is lacking and so are the returns to shareholders. While one could argue it is appropriate for the CEO to be paid less than other CEOs of similar sized companies, given company performance, we would not call the pay overly generous. Shifting gears from CEO pay for a second, we’ve picked out 2 warning signs for Saputo that investors should be aware of in a dynamic business environment.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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