Is Schaffer Corporation Limited (ASX:SFC) Overpaying Its CEO?

John Schaffer has been the CEO of Schaffer Corporation Limited (ASX:SFC) since 1987. First, this article will compare CEO compensation with compensation at similar sized 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 process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Schaffer

How Does John Schaffer’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Schaffer Corporation Limited has a market cap of AU$182m, and is paying total annual CEO compensation of AU$1.3m. (This is based on the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at AU$872k. We took a group of companies with market capitalizations below AU$280m, and calculated the median CEO total compensation to be AU$354k.

As you can see, John Schaffer is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Schaffer Corporation Limited is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at Schaffer has changed from year to year.

ASX:SFC CEO Compensation, April 22nd 2019
ASX:SFC CEO Compensation, April 22nd 2019

Is Schaffer Corporation Limited Growing?

On average over the last three years, Schaffer Corporation Limited has grown earnings per share (EPS) by 63% each year (using a line of best fit). The trailing twelve months of revenue was pretty much the same as the prior period.

This demonstrates that the company has been improving recently. A good result. While it would be good to see revenue growth, profits matter more in the end. It could be important to check this free visual depiction of what analysts expect for the future.

Has Schaffer Corporation Limited Been A Good Investment?

I think that the total shareholder return of 206%, over three years, would leave most Schaffer Corporation Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary…

We examined the amount Schaffer Corporation Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

However, the earnings per share growth over three years is certainly impressive. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Schaffer shares (free trial).

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.