This article will reflect on the compensation paid to Alf Moufarrige who has served as CEO of Servcorp Limited (ASX:SRV) since 1999. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Servcorp

Comparing Servcorp Limited's CEO Compensation With the industry

According to our data, Servcorp Limited has a market capitalization of AU$296m, and paid its CEO total annual compensation worth AU$475k over the year to June 2020. We note that's a small decrease of 7.2% on last year. Notably, the salary which is AU$424.8k, represents most of the total compensation being paid.

On comparing similar companies from the same industry with market caps ranging from AU$130m to AU$518m, we found that the median CEO total compensation was AU$926k. Accordingly, Servcorp pays its CEO under the industry median. Furthermore, Alf Moufarrige directly owns AU$6.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 81% of total compensation out of all the companies we analyzed, while other remuneration made up 19% of the pie. Although there is a difference in how total compensation is set, Servcorp more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Servcorp Limited's Growth Numbers

Servcorp Limited has reduced its earnings per share by 44% a year over the last three years. Its revenue is up 4.5% over the last year.

Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Servcorp Limited Been A Good Investment?

Since shareholders would have lost about 33% over three years, some Servcorp Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we touched on above, Servcorp Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. EPS growth has failed to impress us, and the same can be said about shareholder returns. It's tough to say that Alf is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 3 warning signs for Servcorp that investors should look into moving forward.

Switching gears from Servcorp, 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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