How Does Solution Dynamics' (NZSE:SDL) CEO Pay Compare With Company Performance?

This article will reflect on the compensation paid to Siva Sivasubramaniam who has served as CEO of Solution Dynamics Limited (NZSE:SDL) since 2006. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Solution Dynamics.

See our latest analysis for Solution Dynamics

How Does Total Compensation For Siva Sivasubramaniam Compare With Other Companies In The Industry?

Our data indicates that Solution Dynamics Limited has a market capitalization of NZ$45m, and total annual CEO compensation was reported as NZ$342k for the year to June 2020. We note that's a decrease of 8.6% compared to last year. It is worth noting that the CEO compensation consists entirely of the salary, worth NZ$342k.

In comparison with other companies in the industry with market capitalizations under NZ$274m, the reported median total CEO compensation was NZ$428k. This suggests that Solution Dynamics remunerates its CEO largely in line with the industry average. What's more, Siva Sivasubramaniam holds NZ$2.7m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 46% of total compensation out of all the companies we analyzed, while other remuneration made up 54% of the pie. Speaking on a company level, Solution Dynamics prefers to tread along a traditional path, disbursing all compensation through a salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Solution Dynamics Limited's Growth

Over the past three years, Solution Dynamics Limited has seen its earnings per share (EPS) grow by 11% per year. Its revenue is up 29% 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. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Solution Dynamics Limited Been A Good Investment?

Boasting a total shareholder return of 68% over three years, Solution Dynamics Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Solution Dynamics rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we touched on above, Solution Dynamics Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Investors would surely be happy to see that returns have been great, and that EPS is up. Indeed, many might consider that Siva is compensated rather modestly, given the solid company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.

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 Solution Dynamics 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. 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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