We Discuss Why The CEO Of Reach Subsea ASA (OB:REACH) Is Due For A Pay Rise

Key Insights

• Reach Subsea's Annual General Meeting to take place on 31st of May
• Salary of kr2.19m is part of CEO Jostein Alendal's total remuneration
• Total compensation is 55% below industry average
• Reach Subsea's EPS grew by 11% over the past three years while total shareholder return over the past three years was 132%

Shareholders will be pleased by the impressive results for Reach Subsea ASA (OB:REACH) recently and CEO Jostein Alendal has played a key role. This would be kept in mind at the upcoming AGM on 31st of May which will be a chance for them to hear the board review the financial results, discuss future company strategy and vote on resolutions such as executive remuneration and other matters. Let's take a look at why we think the CEO has done a good job and we'll present the case for a bump in pay.

See our latest analysis for Reach Subsea

How Does Total Compensation For Jostein Alendal Compare With Other Companies In The Industry?

At the time of writing, our data shows that Reach Subsea ASA has a market capitalization of kr1.7b, and reported total annual CEO compensation of kr3.2m for the year to December 2023. That's a modest increase of 6.5% on the prior year. Notably, the salary which is kr2.19m, represents most of the total compensation being paid.

On comparing similar companies from the Norwegian Energy Services industry with market caps ranging from kr1.1b to kr4.3b, we found that the median CEO total compensation was kr7.3m. That is to say, Jostein Alendal is paid under the industry median. Moreover, Jostein Alendal also holds kr948k worth of Reach Subsea stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	kr2.2m	kr2.0m	67%
Other	kr1.1m	kr1.0m	33%
Total Compensation	kr3.2m	kr3.0m	100%

Speaking on an industry level, nearly 63% of total compensation represents salary, while the remainder of 37% is other remuneration. Although there is a difference in how total compensation is set, Reach Subsea more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Reach Subsea ASA's Growth Numbers

Over the past three years, Reach Subsea ASA has seen its earnings per share (EPS) grow by 11% per year. Its revenue is up 82% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. 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 Reach Subsea ASA Been A Good Investment?

Most shareholders would probably be pleased with Reach Subsea ASA for providing a total return of 132% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for Reach Subsea that investors should look into moving forward.

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.