Shareholders Will Likely Find Alstom SA's (EPA:ALO) CEO Compensation Acceptable

By
Simply Wall St
Published
July 21, 2021
ENXTPA:ALO
Source: Shutterstock

Performance at Alstom SA (EPA:ALO) has been rather uninspiring recently and shareholders may be wondering how CEO Henri Poupart-Lafarge plans to fix this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 28 July 2021. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. In our opinion, CEO compensation does not look excessive and we discuss why.

See our latest analysis for Alstom

Comparing Alstom SA's CEO Compensation With the industry

At the time of writing, our data shows that Alstom SA has a market capitalization of €14b, and reported total annual CEO compensation of €1.6m for the year to March 2021. We note that's a decrease of 52% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €797k.

For comparison, other companies in the industry with market capitalizations above €6.8b, reported a median total CEO compensation of €2.7m. Accordingly, Alstom pays its CEO under the industry median. Furthermore, Henri Poupart-Lafarge directly owns €2.8m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary €797k €825k 50%
Other €811k €2.6m 50%
Total Compensation€1.6m €3.4m100%

Speaking on an industry level, nearly 52% of total compensation represents salary, while the remainder of 48% is other remuneration. Our data reveals that Alstom allocates salary more or less in line with the wider market. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ENXTPA:ALO CEO Compensation July 22nd 2021

Alstom SA's Growth

Alstom SA has reduced its earnings per share by 14% a year over the last three years. In the last year, its revenue is up 7.1%.

Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. 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 Alstom SA Been A Good Investment?

Alstom SA has served shareholders reasonably well, with a total return of 20% 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.

To Conclude...

While it's true that shareholders have seen decent returns, it's hard to overlook the lack of earnings growth and this makes us wonder if the current returns can continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 1 which is potentially serious) in Alstom we think you should know about.

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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.