Leading Schneider Electric Infrastructure Limited (NSEI:SCHNEIDER) as the CEO, Prakash Chandraker took the company to a valuation of ₹30.14B. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Chandraker’s pay and compare this to the company’s performance over the same period, as well as measure it against other Indian CEOs leading companies of similar size and profitability. Check out our latest analysis for Schneider Electric Infrastructure
What has SCHNEIDER performance been like?
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. Most recently, SCHNEIDER released negative earnings of -₹1,850.8M , which is a further decline from prior year’s loss of -₹252.4M. Additionally, on average, SCHNEIDER has been loss-making in the past, with a 5-year average EPS of -₹2.45. In the situation of negative earnings, the company may be incurring a period of reinvestment and growth, or it can be a sign of some headwind. Regardless, CEO compensation should be reflective of the current state of the business. From the latest report, Chandraker’s total compensation increased by 29.56% to ₹15,543,464. Although I couldn’t find information on the composition of Chandraker’s pay, if some portion were non-cash items such as stocks and options, then variabilities in SCHNEIDER’s share price can move the real level of what the CEO actually receives.
Is SCHNEIDER’s CEO overpaid relative to the market?
Even though there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can estimate a high-level yardstick to see if SCHNEIDER deviates substantially from its peers. This outcome can help shareholders ask the right question about Chandraker’s incentive alignment. Generally, a BSE or NSEI small-cap has a value of ₹9.88 Arab, generates earnings of ₹43 Crore, and pays its CEO at roughly ₹73 Lakh per annum. Normally I would use earnings and market cap to account for variations in performance, however, SCHNEIDER’s negative earnings reduces the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Chandraker’s pay is above other similar companies.