Shareholders May Find It Hard To Justify Increasing PGS ASA's (OB:PGS) CEO Compensation For Now

The underwhelming share price performance of PGS ASA (OB:PGS) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 21 April 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for PGS

How Does Total Compensation For Rune Pedersen Compare With Other Companies In The Industry?

Our data indicates that PGS ASA has a market capitalization of kr2.5b, and total annual CEO compensation was reported as US$742k for the year to December 2020. That's a notable decrease of 21% on last year. We note that the salary portion, which stands at US$464.3k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between kr850m and kr3.4b had a median total CEO compensation of US$861k. From this we gather that Rune Pedersen is paid around the median for CEOs in the industry. What's more, Rune Pedersen holds kr1.5m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	US$464k	US$534k	63%
Other	US$277k	US$403k	37%
Total Compensation	US$742k	US$937k	100%

On an industry level, roughly 63% of total compensation represents salary and 37% is other remuneration. Our data reveals that PGS allocates salary more or less in line with the wider market. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

PGS ASA's Growth

Over the past three years, PGS ASA has seen its earnings per share (EPS) grow by 38% per year. In the last year, its revenue is down 49%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has PGS ASA Been A Good Investment?

Few PGS ASA shareholders would feel satisfied with the return of -80% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

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

Important note: PGS is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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