Sahba Abedian is the CEO of Sunland Group Limited (ASX:SDG), which has recently grown to a market capitalization of AU$267.64M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. I will break down Abedian’s pay and compare this to the company’s performance over the same period, as well as measure it against other Australian CEOs leading companies of similar size and profitability. Check out our latest analysis for Sunland Group
What has been the trend in SDG’s earnings?
Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Over the last year SDG released a profit of AU$50.92M , which is an increase of 52.60% from its last year’s earnings of AU$33.37M. This is a positive indication that SDG has strived to maintain a good track record of profitability in the face of any headwinds. Since earnings are heading towards the right direction, CEO pay should be reflective of Abedian’s value creation for shareholders. During this period Abedian’s total compensation dropped by a trivial -1.31%, to AU$734.65K. Moreover, Abedian’s pay is also made up of 0.026% non-cash elements, which means that fluctuations in SDG’s share price can impact the actual level of what the CEO actually receives.
Is SDG’s CEO overpaid relative to the market?
Though there is no cookie-cutter approach, since compensation should be tailored to the specific company and market, we can determine a high-level yardstick to see if SDG is an outlier. This outcome helps investors ask the right question about Abedian’s incentive alignment. Generally, an Australian small-cap is worth around $140M, generates earnings of $10M, and pays its CEO at roughly $500,000 per annum. Allowing for SDG’s size and performance, in terms of market cap and earnings, it seems that Abedian is paid on a similar level to other Australian CEOs of small-caps, on average. This could mean Abedian is paid a suitable level.
Next Steps:
Hopefully this article has given you insight on how shareholders should think about SDG’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. If you have not done so already, I highly recommend you to complete your research by taking a look at the following: