Alistair Phillips-Davies has been the CEO of SSE plc (LON:SSE) since 2013. This analysis aims first to contrast CEO compensation with other large companies. Next, we'll consider growth that the business demonstrates. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Alistair Phillips-Davies's Compensation Compare With Similar Sized Companies?
Our data indicates that SSE plc is worth UK£13b, and total annual CEO compensation was reported as UK£1.7m for the year to March 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£890k. We looked at a group of companies with market capitalizations over UK£6.2b and the median CEO total compensation was UK£3.8m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
This would give shareholders a good impression of the company, since most large companies pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
You can see, below, how CEO compensation at SSE has changed over time.
Is SSE plc Growing?
Over the last three years SSE plc has shrunk its earnings per share by an average of 1.2% per year (measured with a line of best fit). Its revenue is down 73% over last year.
Unfortunately there is a complete lack of earnings per share improvement, over three years. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has SSE plc Been A Good Investment?
SSE plc has not done too badly by shareholders, with a total return of 2.1%, over three years. 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.
SSE plc is currently paying its CEO below what is normal for large companies.
Shareholders should note that compensation for Alistair Phillips-Davies is under the median of a group of large companies. However, the earnings per share are not moving in the right direction, and the returns to shareholders could have been better. We would like to see EPS growth from the business, although we wouldn't say the CEO pay is high. So you may want to check if insiders are buying SSE shares with their own money (free access).
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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.