Despite The Bank of Nova Scotia's (TSE:BNS) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 13 April 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
Check out our latest analysis for Bank of Nova Scotia
How Does Total Compensation For Brian Porter Compare With Other Companies In The Industry?
At the time of writing, our data shows that The Bank of Nova Scotia has a market capitalization of CA$95b, and reported total annual CEO compensation of CA$12m for the year to October 2020. We note that's a small decrease of 3.3% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$1.3m.
In comparison with other companies in the industry with market capitalizations over CA$10b , the reported median total CEO compensation was CA$11m. So it looks like Bank of Nova Scotia compensates Brian Porter in line with the median for the industry. What's more, Brian Porter holds CA$11m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | CA$1.3m | CA$1.3m | 11% |
| Other | CA$11m | CA$11m | 89% |
| Total Compensation | CA$12m | CA$13m | 100% |
Speaking on an industry level, nearly 11% of total compensation represents salary, while the remainder of 89% is other remuneration. Although there is a difference in how total compensation is set, Bank of Nova Scotia more or less reflects the market in terms of setting the salary. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
The Bank of Nova Scotia's Growth
Over the last three years, The Bank of Nova Scotia has shrunk its earnings per share by 7.4% per year. It saw its revenue drop 10% over the last year.
Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 The Bank of Nova Scotia Been A Good Investment?
The Bank of Nova Scotia has served shareholders reasonably well, with a total return of 18% over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
In Summary...
While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
Shareholders may want to check for free if Bank of Nova Scotia insiders are buying or selling shares.
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. 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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