Soitec S.A.'s (EPA:SOI) CEO Compensation Looks Acceptable To Us And Here's Why

Soitec S.A. (EPA:SOI) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. The upcoming AGM on 28 July 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. 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 Soitec

How Does Total Compensation For Paul Boudre Compare With Other Companies In The Industry?

Our data indicates that Soitec S.A. has a market capitalization of €6.3b, and total annual CEO compensation was reported as €2.5m for the year to March 2021. We note that's a decrease of 38% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €550k.

On examining similar-sized companies in the industry with market capitalizations between €3.4b and €10b, we discovered that the median CEO total compensation of that group was €2.5m. This suggests that Soitec remunerates its CEO largely in line with the industry average. Moreover, Paul Boudre also holds €10m worth of Soitec stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	€550k	€550k	22%
Other	€1.9m	€3.5m	78%
Total Compensation	€2.5m	€4.0m	100%

On an industry level, roughly 41% of total compensation represents salary and 59% is other remuneration. It's interesting to note that Soitec allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Soitec S.A.'s Growth

Over the last three years, Soitec S.A. has shrunk its earnings per share by 9.1% per year. Its revenue is down 2.3% over the previous year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Soitec S.A. Been A Good Investment?

We think that the total shareholder return of 168%, over three years, would leave most Soitec S.A. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Soitec that investors should be aware of in a dynamic business environment.

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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