Graham Kerr has been the CEO of South32 Limited (ASX:S32) since 2014. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Graham Kerr's Compensation Compare With Similar Sized Companies?
According to our data, South32 Limited has a market capitalization of AU$12b, and paid its CEO total annual compensation worth US$7.0m over the year to June 2019. That's a fairly small increase of 3.0% on year before. While we always look at total compensation first, we note that the salary component is less, at US$1.6m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of AU$5.8b to AU$18b. The median total CEO compensation was AU$4.1m.
As you can see, Graham Kerr is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean South32 Limited is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see a visual representation of the CEO compensation at South32, below.
Is South32 Limited Growing?
Over the last three years South32 Limited has grown its earnings per share (EPS) by an average of 47% per year (using a line of best fit). Its revenue is down 3.0% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. Revenue growth is a real positive for growth, but ultimately profits are more important. You might want to check this free visual report on analyst forecasts for future earnings.
Has South32 Limited Been A Good Investment?
South32 Limited has generated a total shareholder return of 7.4% over three years, so most shareholders wouldn't be too disappointed. But they would probably prefer not to see CEO compensation far in excess of the median.
We examined the amount South32 Limited pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
However, the earnings per share growth over three years is certainly impressive. We also think investors are doing ok, over the same time period. You might wish to research management further, but on this analysis, considering the EPS growth, we wouldn't call the CEO pay problematic. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling South32 (free visualization of insider trades).
Important note: South32 may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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