Stock Analysis

Why Synchrony Financial's (NYSE:SYF) CEO Pay Matters

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NYSE:SYF
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Margaret Keane has been the CEO of Synchrony Financial (NYSE:SYF) since 2014, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Synchrony Financial pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Synchrony Financial

Comparing Synchrony Financial's CEO Compensation With the industry

According to our data, Synchrony Financial has a market capitalization of US$19b, and paid its CEO total annual compensation worth US$12m over the year to December 2019. That is, the compensation was roughly the same as last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$11m. From this we gather that Margaret Keane is paid around the median for CEOs in the industry. What's more, Margaret Keane holds US$23m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20192018Proportion (2019)
Salary US$1.2m US$1.2m 10%
Other US$11m US$11m 90%
Total CompensationUS$12m US$12m100%

On an industry level, around 18% of total compensation represents salary and 82% is other remuneration. In Synchrony Financial's case, non-salary compensation represents a greater slice of total remuneration, in comparison 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.

ceo-compensation
NYSE:SYF CEO Compensation December 22nd 2020

Synchrony Financial's Growth

Synchrony Financial has reduced its earnings per share by 5.3% a year over the last three years. In the last year, its revenue is down 36%.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Synchrony Financial Been A Good Investment?

Since shareholders would have lost about 6.3% over three years, some Synchrony Financial investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we noted earlier, Synchrony Financial pays its CEO in line with similar-sized companies belonging to the same industry. On the other hand, EPS growth and total shareholder return have been negative for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 3 warning signs for Synchrony Financial that investors should think about before committing capital to this stock.

Switching gears from Synchrony Financial, 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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