Here's What We Learned About The CEO Pay At Service Stream Limited (ASX:SSM)

Leigh MacKender has been the CEO of Service Stream Limited (ASX:SSM) since 2014, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

View our latest analysis for Service Stream

How Does Total Compensation For Leigh MacKender Compare With Other Companies In The Industry?

At the time of writing, our data shows that Service Stream Limited has a market capitalization of AU$781m, and reported total annual CEO compensation of AU$1.6m for the year to June 2020. Notably, that's a decrease of 24% over the year before. In particular, the salary of AU$879.0k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between AU$261m and AU$1.0b had a median total CEO compensation of AU$967k. Accordingly, our analysis reveals that Service Stream Limited pays Leigh MacKender north of the industry median. Furthermore, Leigh MacKender directly owns AU$2.0m worth of shares in the company.

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Service Stream pays a modest slice of remuneration through salary, as compared to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Service Stream Limited's Growth Numbers

Service Stream Limited has seen its earnings per share (EPS) increase by 16% a year over the past three years. It achieved revenue growth of 9.0% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. 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 Service Stream Limited Been A Good Investment?

Boasting a total shareholder return of 62% over three years, Service Stream Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

As previously discussed, Leigh is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. But EPS growth and shareholder returns have been top-notch for the past three years. As a result of the excellent all-round performance of the company, we believe CEO compensation is fair. The pleasing shareholder returns are the cherry on top. We wouldn't be wrong in saying that shareholders feel that Leigh's performance creates value for the company.

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 2 warning signs for Service Stream 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.

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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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