Shareholders May Not Be So Generous With SSE plc's (LON:SSE) CEO Compensation And Here's Why

Key Insights

• SSE to hold its Annual General Meeting on 18th of July
• Salary of UK£999.0k is part of CEO Paul Morton Phillips-Davies's total remuneration
• The total compensation is 121% higher than the average for the industry
• SSE's total shareholder return over the past three years was 40% while its EPS was down 8.6% over the past three years

The share price of SSE plc (LON:SSE) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. The upcoming AGM on 18th of July 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. 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 SSE

How Does Total Compensation For Paul Morton Phillips-Davies Compare With Other Companies In The Industry?

At the time of writing, our data shows that SSE plc has a market capitalization of UK£20b, and reported total annual CEO compensation of UK£3.5m for the year to March 2024. That's a notable decrease of 26% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£999k.

For comparison, other companies in the the United Kingdom Electric Utilities industry with market capitalizations above UK£6.2b, reported a median total CEO compensation of UK£1.6m. Accordingly, our analysis reveals that SSE plc pays Paul Morton Phillips-Davies north of the industry median. Moreover, Paul Morton Phillips-Davies also holds UK£7.9m worth of SSE stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	UK£999k	UK£952k	28%
Other	UK£2.5m	UK£3.8m	72%
Total Compensation	UK£3.5m	UK£4.8m	100%

Talking in terms of the industry, salary represented approximately 53% of total compensation out of all the companies we analyzed, while other remuneration made up 47% of the pie. SSE pays a modest slice of remuneration through salary, as compared 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.

SSE plc's Growth

Over the last three years, SSE plc has shrunk its earnings per share by 8.6% per year. It saw its revenue drop 16% over the last year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. 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 SSE plc Been A Good Investment?

Most shareholders would probably be pleased with SSE plc for providing a total return of 40% 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...

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 did our research and spotted 3 warning signs for SSE that investors should look into moving forward.

Switching gears from SSE, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com