Kevin Gallagher has been the CEO of Santos Limited (ASX:STO) since 2016, 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.
How Does Total Compensation For Kevin Gallagher Compare With Other Companies In The Industry?
Our data indicates that Santos Limited has a market capitalization of AU$13b, and total annual CEO compensation was reported as US$4.5m for the year to December 2019. We note that's an increase of 17% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.3m.
On examining similar-sized companies in the industry with market capitalizations between AU$5.5b and AU$16b, we discovered that the median CEO total compensation of that group was US$2.6m. Accordingly, our analysis reveals that Santos Limited pays Kevin Gallagher north of the industry median. Furthermore, Kevin Gallagher directly owns AU$7.0m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 76% of total compensation represents salary, while the remainder of 24% is other remuneration. It's interesting to note that Santos allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Santos Limited's Growth
Santos Limited has seen its earnings per share (EPS) increase by 70% a year over the past three years. In the last year, its revenue is down 5.8%.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Santos Limited Been A Good Investment?
Santos Limited has generated a total shareholder return of 30% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we noted earlier, Santos pays its CEO higher than the norm for similar-sized companies belonging to the same industry. But the company has impressed us with its EPS growth, over three years. Looking at the same time period, we think that the shareholder returns are respectable. So, considering the EPS growth we do not wish to criticize CEO compensation, though we'd recommend further research on management.
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 did our research and spotted 1 warning sign for Santos that investors should look into moving forward.
Important note: Santos 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.
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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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