Most Shareholders Will Probably Find That The Compensation For SAP SE's (ETR:SAP) CEO Is Reasonable

Key Insights

• SAP's Annual General Meeting to take place on 15th of May
• Total pay for CEO Christian Klein includes €1.10m salary
• Total compensation is 33% below industry average
• SAP's total shareholder return over the past three years was 67% while its EPS was down 21% over the past three years

Performance at SAP SE (ETR:SAP) has been rather uninspiring recently and shareholders may be wondering how CEO Christian Klein plans to fix this. At the next AGM coming up on 15th of May, they can influence managerial decision making through voting on resolutions, including executive remuneration. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We think CEO compensation looks appropriate given the data we have put together.

See our latest analysis for SAP

Comparing SAP SE's CEO Compensation With The Industry

At the time of writing, our data shows that SAP SE has a market capitalization of €205b, and reported total annual CEO compensation of €8.5m for the year to December 2023. This means that the compensation hasn't changed much from last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €1.1m.

In comparison with other companies in the German Software industry with market capitalizations over €7.4b, the reported median total CEO compensation was €13m. This suggests that Christian Klein is paid below the industry median.

Component	2023	2022	Proportion (2023)
Salary	€1.1m	€1.1m	13%
Other	€7.4m	€7.4m	87%
Total Compensation	€8.5m	€8.5m	100%

On an industry level, roughly 65% of total compensation represents salary and 35% is other remuneration. It's interesting to note that SAP 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.

SAP SE's Growth

Over the last three years, SAP SE has shrunk its earnings per share by 21% per year. In the last year, its revenue is up 5.4%.

Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 SAP SE Been A Good Investment?

We think that the total shareholder return of 67%, over three years, would leave most SAP SE shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean these strong returns may not continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

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 SAP that investors should look into moving forward.

Important note: SAP 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.