Paul Lynam has been the CEO of Secure Trust Bank PLC (LON:STB) since 2010, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
See our latest analysis for Secure Trust Bank
Comparing Secure Trust Bank PLC's CEO Compensation With the industry
At the time of writing, our data shows that Secure Trust Bank PLC has a market capitalization of UK£177m, and reported total annual CEO compensation of UK£1.8m for the year to December 2019. That is, the compensation was roughly the same as last year. In particular, the salary of UK£1.20m, makes up a huge portion of the total compensation being paid to the CEO.
On examining similar-sized companies in the industry with market capitalizations between UK£75m and UK£301m, we discovered that the median CEO total compensation of that group was UK£404k. Accordingly, our analysis reveals that Secure Trust Bank PLC pays Paul Lynam north of the industry median. What's more, Paul Lynam holds UK£669k worth of shares in the company in their own name.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | UK£1.2m | UK£1.2m | 67% |
| Other | UK£604k | UK£657k | 33% |
| Total Compensation | UK£1.8m | UK£1.9m | 100% |
On an industry level, around 44% of total compensation represents salary and 56% is other remuneration. According to our research, Secure Trust Bank has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
A Look at Secure Trust Bank PLC's Growth Numbers
Over the past three years, Secure Trust Bank PLC has seen its earnings per share (EPS) grow by 15% per year. It saw its revenue drop 5.9% over the last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. While it would be good to see revenue growth, profits matter more in the end. 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 Secure Trust Bank PLC Been A Good Investment?
Given the total shareholder loss of 42% over three years, many shareholders in Secure Trust Bank PLC are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
To Conclude...
As we noted earlier, Secure Trust Bank pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, we must not forget that the EPS growth has been very strong, but shareholder returns — over the same period — have been disappointing. Considering overall performance, we can't say Paul is underpaid, in fact compensation is definitely on the higher side.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 2 warning signs for Secure Trust Bank (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.
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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About LSE:STB
Secure Trust Bank
Provides banking and financial products and services in the United Kingdom.
Very undervalued with reasonable growth potential and pays a dividend.
