Shareholders May Not Be So Generous With Swiss Re AG's (VTX:SREN) CEO Compensation And Here's Why

The share price of Swiss Re AG (VTX:SREN) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 16 April 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Swiss Re

Comparing Swiss Re AG's CEO Compensation With the industry

According to our data, Swiss Re AG has a market capitalization of CHF27b, and paid its CEO total annual compensation worth US$6.9m over the year to December 2020. Notably, that's an increase of 12% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.7m.

On comparing similar companies in the industry with market capitalizations above CHF7.4b, we found that the median total CEO compensation was US$3.3m. Accordingly, our analysis reveals that Swiss Re AG pays Christian Mumenthaler north of the industry median. Moreover, Christian Mumenthaler also holds CHF7.8m worth of Swiss Re stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	US$1.7m	US$1.5m	25%
Other	US$5.2m	US$4.6m	75%
Total Compensation	US$6.9m	US$6.1m	100%

Speaking on an industry level, nearly 39% of total compensation represents salary, while the remainder of 61% is other remuneration. Swiss Re 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.

Swiss Re AG's Growth

Over the last three years, Swiss Re AG has shrunk its earnings per share by 85% per year. Its revenue is down 12% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Swiss Re AG Been A Good Investment?

With a total shareholder return of 18% over three years, Swiss Re AG shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

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.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for Swiss Re that investors should look into moving forward.

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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