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Is M&C Saatchi plc (LON:SAA) Overpaying Its CEO?

David Kershaw is the CEO of M&C Saatchi plc (LON:SAA). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. 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.

View our latest analysis for M&C Saatchi

How Does David Kershaw's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that M&C Saatchi plc has a market cap of UK£113m, and reported total annual CEO compensation of UK£421k for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at UK£374k. We looked at a group of companies with market capitalizations under UK£154m, and the median CEO total compensation was UK£251k.

Thus we can conclude that David Kershaw receives more in total compensation than the median of a group of companies in the same market, and of similar size to M&C Saatchi plc. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at M&C Saatchi has changed over time.

AIM:SAA CEO Compensation, January 20th 2020
AIM:SAA CEO Compensation, January 20th 2020

Is M&C Saatchi plc Growing?

On average over the last three years, M&C Saatchi plc has grown earnings per share (EPS) by 40% each year (using a line of best fit). In the last year, its revenue is up 23%.

This demonstrates that the company has been improving recently. A good result. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Shareholders might be interested in this free visualization of analyst forecasts.

Has M&C Saatchi plc Been A Good Investment?

Since shareholders would have lost about 63% over three years, some M&C Saatchi plc shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared total CEO remuneration at M&C Saatchi plc with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at M&C Saatchi.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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