How Should Investors Feel About Scentre Group's (ASX:SCG) CEO Remuneration?

Peter Allen has been the CEO of Scentre Group (ASX:SCG) since 2014, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Scentre Group pays its CEO appropriately, considering its funds from operations growth and total shareholder returns.

View our latest analysis for Scentre Group

How Does Total Compensation For Peter Allen Compare With Other Companies In The Industry?

At the time of writing, our data shows that Scentre Group has a market capitalization of AU$15b, and reported total annual CEO compensation of AU$7.2m for the year to December 2019. That's a slight decrease of 7.5% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$2.0m.

In comparison with other companies in the industry with market capitalizations over AU$11b , the reported median total CEO compensation was AU$9.1m. From this we gather that Peter Allen is paid around the median for CEOs in the industry. What's more, Peter Allen holds AU$17m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, roughly 51% of total compensation represents salary and 49% is other remuneration. Scentre Group pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Scentre Group's Growth Numbers

Scentre Group has reduced its funds from operations (FFO) by 6.3% per year over the last three years. In the last year, its revenue is down 9.3%.

Few shareholders would be pleased to read that FFO have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Scentre Group Been A Good Investment?

With a three year total loss of 23% for the shareholders, Scentre Group would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As previously discussed, Peter is compensated close to the median for companies of its size, and which belong to the same industry. In the meantime, the company has reported declining FFO growth and shareholder returns over the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Scentre Group (1 is potentially serious!) that you should be aware of before investing here.

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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