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Here's Why Shareholders Should Examine Synectics plc's (LON:SNX) CEO Compensation Package More Closely

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Simply Wall St
·4 min read
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Shareholders will probably not be too impressed with the underwhelming results at Synectics plc (LON:SNX) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 27 April 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for Synectics

How Does Total Compensation For Paul Webb Compare With Other Companies In The Industry?

At the time of writing, our data shows that Synectics plc has a market capitalization of UK£24m, and reported total annual CEO compensation of UK£274k for the year to November 2020. Notably, that's a decrease of 21% over the year before. We note that the salary portion, which stands at UK£244.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below UK£143m, we found that the median total CEO compensation was UK£207k. Accordingly, our analysis reveals that Synectics plc pays Paul Webb north of the industry median. Moreover, Paul Webb also holds UK£83k worth of Synectics stock directly under their own name.

Component

2020

2019

Proportion (2020)

Salary

UK£244k

UK£242k

89%

Other

UK£30k

UK£105k

11%

Total Compensation

UK£274k

UK£347k

100%

Speaking on an industry level, nearly 78% of total compensation represents salary, while the remainder of 22% is other remuneration. Synectics is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

ceo-compensation
ceo-compensation

A Look at Synectics plc's Growth Numbers

Over the last three years, Synectics plc has shrunk its earnings per share by 95% per year. Its revenue is down 35% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Synectics plc Been A Good Investment?

Since shareholders would have lost about 20% over three years, some Synectics plc investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 2 warning signs for Synectics (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Synectics, 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.

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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