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Siva Sivasubramaniam became the CEO of Solution Dynamics Limited (NZSE:SDL) in 2006, 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 Solution Dynamics.
Comparing Solution Dynamics Limited's CEO Compensation With the industry
Our data indicates that Solution Dynamics Limited has a market capitalization of NZ$45m, and total annual CEO compensation was reported as NZ$342k for the year to June 2020. Notably, that's a decrease of 8.6% over the year before. It is worth noting that the CEO compensation consists entirely of the salary, worth NZ$342k.
On comparing similar-sized companies in the industry with market capitalizations below NZ$278m, we found that the median total CEO compensation was NZ$427k. From this we gather that Siva Sivasubramaniam is paid around the median for CEOs in the industry. Furthermore, Siva Sivasubramaniam directly owns NZ$2.7m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 46% of total compensation represents salary and 54% is other remuneration. Speaking on a company level, Solution Dynamics prefers to tread along a traditional path, disbursing all compensation through a salary. 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.
Solution Dynamics Limited's Growth
Solution Dynamics Limited has seen its earnings per share (EPS) increase by 11% a year over the past three years. In the last year, its revenue is up 29%.
Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Solution Dynamics Limited Been A Good Investment?
We think that the total shareholder return of 70%, over three years, would leave most Solution Dynamics Limited shareholders smiling. 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.
Solution Dynamics rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we touched on above, Solution Dynamics Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. The company is growing EPS and total shareholder returns have been pleasing. Although the pay is close to the industry median, overall performance is excellent, so we don't think the CEO is paid too generously. Stockholders might even be okay with a bump in pay, seeing as how investor returns have been so strong.
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 2 warning signs for Solution Dynamics that you should be aware of before investing.
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.
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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