It's Unlikely That The CEO Of Sonic Healthcare Limited (ASX:SHL) Will See A Huge Pay Rise This Year

Key Insights

• Sonic Healthcare's Annual General Meeting to take place on 15th of November
• Salary of AU$2.37m is part of CEO Colin Goldschmidt's total remuneration
• The total compensation is similar to the average for the industry
• Sonic Healthcare's three-year loss to shareholders was 2.9% while its EPS grew by 9.1% over the past three years

In the past three years, the share price of Sonic Healthcare Limited (ASX:SHL) has struggled to generate growth for its shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 15th of November could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

See our latest analysis for Sonic Healthcare

How Does Total Compensation For Colin Goldschmidt Compare With Other Companies In The Industry?

According to our data, Sonic Healthcare Limited has a market capitalization of AU$14b, and paid its CEO total annual compensation worth AU$6.0m over the year to June 2023. Notably, that's a decrease of 22% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$2.4m.

On examining similar-sized companies in the Australian Healthcare industry with market capitalizations between AU$6.2b and AU$19b, we discovered that the median CEO total compensation of that group was AU$6.0m. From this we gather that Colin Goldschmidt is paid around the median for CEOs in the industry. Moreover, Colin Goldschmidt also holds AU$28m worth of Sonic Healthcare stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	AU$2.4m	AU$2.4m	40%
Other	AU$3.6m	AU$5.3m	60%
Total Compensation	AU$6.0m	AU$7.7m	100%

Speaking on an industry level, nearly 60% of total compensation represents salary, while the remainder of 40% is other remuneration. Sonic Healthcare sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Sonic Healthcare Limited's Growth Numbers

Sonic Healthcare Limited's earnings per share (EPS) grew 9.1% per year over the last three years. Its revenue is down 13% over the previous year.

We would argue that the lack of revenue growth in the last year is less than ideal, but the modest improvement in EPS is good. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Sonic Healthcare Limited Been A Good Investment?

With a three year total loss of 2.9% for the shareholders, Sonic Healthcare Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for Sonic Healthcare that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.