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What Does Santos' (ASX:STO) CEO Pay Reveal?

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Simply Wall St
·3 min read
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Kevin Gallagher became the CEO of Santos Limited (ASX:STO) in 2016, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Santos.

See our latest analysis for Santos

Comparing Santos Limited's CEO Compensation With the industry

At the time of writing, our data shows that Santos Limited has a market capitalization of AU$14b, and reported total annual CEO compensation of US$4.2m for the year to December 2020. That's a slight decrease of 5.8% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.4m.

In comparison with other companies in the industry with market capitalizations over AU$10b , the reported median total CEO compensation was US$7.4m. This suggests that Kevin Gallagher is paid below the industry median. Moreover, Kevin Gallagher also holds AU$8.9m worth of Santos stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2020

2019

Proportion (2020)

Salary

US$1.4m

US$1.3m

32%

Other

US$2.9m

US$3.2m

68%

Total Compensation

US$4.2m

US$4.5m

100%

Speaking on an industry level, nearly 71% of total compensation represents salary, while the remainder of 29% is other remuneration. In Santos' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

Santos Limited's Growth

Santos Limited has reduced its earnings per share by 9.1% a year over the last three years. Its revenue is down 16% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-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 Santos Limited Been A Good Investment?

Boasting a total shareholder return of 40% over three years, Santos Limited has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

As previously discussed, Kevin is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. And while EPS growth is in the red, shareholder returns have been great over the last three years, so that's certainly a bright spot! Although we'd like to see positive EPS growth, we'd argue the remuneration is modest, based on our observations.

Whatever your view on compensation, you might want to check if insiders are buying or selling Santos shares (free trial).

Important note: Santos is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.