This Is Why Severfield plc's (LON:SFR) CEO Compensation Looks Appropriate

Despite Severfield plc's (LON:SFR) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 01 September 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for Severfield

How Does Total Compensation For Alan Dunsmore Compare With Other Companies In The Industry?

At the time of writing, our data shows that Severfield plc has a market capitalization of UK£248m, and reported total annual CEO compensation of UK£747k for the year to March 2021. Notably, that's a decrease of 15% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£364k.

For comparison, other companies in the same industry with market capitalizations ranging between UK£146m and UK£583m had a median total CEO compensation of UK£613k. This suggests that Severfield remunerates its CEO largely in line with the industry average. Furthermore, Alan Dunsmore directly owns UK£1.0m worth of shares in the company.

Component	2021	2020	Proportion (2021)
Salary	UK£364k	UK£356k	49%
Other	UK£383k	UK£524k	51%
Total Compensation	UK£747k	UK£880k	100%

Speaking on an industry level, nearly 54% of total compensation represents salary, while the remainder of 46% is other remuneration. In Severfield's case, non-salary compensation represents a greater slice of total remuneration, 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.

Severfield plc's Growth

Over the last three years, Severfield plc has shrunk its earnings per share by 2.4% per year. It achieved revenue growth of 11% over the last year.

The lack of EPS growth is certainly uninspiring. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. 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 Severfield plc Been A Good Investment?

With a total shareholder return of 21% over three years, Severfield plc shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

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. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for Severfield 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. 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.
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