Stock Analysis

A Quick Analysis On SSE's (LON:SSE) CEO Compensation

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LSE:SSE
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Alistair Phillips-Davies has been the CEO of SSE plc (LON:SSE) since 2013, 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.

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Comparing SSE plc's CEO Compensation With the industry

According to our data, SSE plc has a market capitalization of UK£15b, and paid its CEO total annual compensation worth UK£2.4m over the year to March 2020. Notably, that's an increase of 48% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£890k.

For comparison, other companies in the industry with market capitalizations above UK£5.8b, reported a median total CEO compensation of UK£1.9m. This suggests that SSE remunerates its CEO largely in line with the industry average. Furthermore, Alistair Phillips-Davies directly owns UK£3.6m worth of shares in the company.

Component20202019Proportion (2020)
Salary UK£890k UK£890k 37%
Other UK£1.5m UK£749k 63%
Total CompensationUK£2.4m UK£1.6m100%

Talking in terms of the industry, salary represented approximately 57% of total compensation out of all the companies we analyzed, while other remuneration made up 43% of the pie. It's interesting to note that SSE 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.

ceo-compensation
LSE:SSE CEO Compensation February 15th 2021

SSE plc's Growth

Over the last three years, SSE plc has shrunk its earnings per share by 9.2% per year. Its revenue is down 6.7% over the previous year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 SSE plc Been A Good Investment?

Most shareholders would probably be pleased with SSE plc for providing a total return of 46% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

As previously discussed, Alistair is compensated close to the median for companies of its size, and which belong to the same industry. This doesn't look good when you see that EPS growth over the last three years has been negative. On the other hand, shareholder returns are showing positive trends over the same time frame. We're not saying CEO compensation is too generous, but shareholders might think performance needs to be improved before paying any more.

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 3 warning signs for SSE (of which 2 are significant!) 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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