We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Sappi Limited's (JSE:SAP) CEO For Now

Key Insights

• Sappi to hold its Annual General Meeting on 7th of February
• Salary of US$532.6k is part of CEO Steve Binnie's total remuneration
• The total compensation is 52% higher than the average for the industry
• Over the past three years, Sappi's EPS grew by 82% and over the past three years, the total shareholder return was 13%

Performance at Sappi Limited (JSE:SAP) has been reasonably good and CEO Steve Binnie has done a decent job of steering the company in the right direction. As shareholders go into the upcoming AGM on 7th of February, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders may still be hesitant of being overly generous with CEO compensation.

See our latest analysis for Sappi

Comparing Sappi Limited's CEO Compensation With The Industry

Our data indicates that Sappi Limited has a market capitalization of R25b, and total annual CEO compensation was reported as US$972k for the year to September 2023. That's a notable decrease of 42% on last year. Notably, the salary which is US$532.6k, represents a considerable chunk of the total compensation being paid.

On examining similar-sized companies in the South Africa Forestry industry with market capitalizations between R19b and R60b, we discovered that the median CEO total compensation of that group was US$640k. This suggests that Steve Binnie is paid more than the median for the industry. What's more, Steve Binnie holds R20m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$533k	US$549k	55%
Other	US$439k	US$1.1m	45%
Total Compensation	US$972k	US$1.7m	100%

Talking in terms of the industry, salary represented approximately 67% of total compensation out of all the companies we analyzed, while other remuneration made up 33% of the pie. It's interesting to note that Sappi allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Sappi Limited's Growth Numbers

Sappi Limited has seen its earnings per share (EPS) increase by 82% a year over the past three years. Its revenue is down 20% over the previous year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Sappi Limited Been A Good Investment?

With a total shareholder return of 13% over three years, Sappi Limited shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

Seeing that the company has put up a decent performance, only a few shareholders, if any at all, might have questions about the CEO pay in the upcoming AGM. However, if the board proposes to increase the compensation, some shareholders might have questions given that the CEO is already being paid higher than the industry.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 4 warning signs for Sappi that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.