Yahoo Finance This Is Why The Bank of Nova Scotia's (TSE:BNS) CEO Compensation Looks Appropriate
Despite positive share price growth of 18% for The Bank of Nova Scotia (TSE:BNS) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 13 April 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
View our latest analysis for Bank of Nova Scotia
Comparing The Bank of Nova Scotia's CEO Compensation With the industry
At the time of writing, our data shows that The Bank of Nova Scotia has a market capitalization of CA$95b, and reported total annual CEO compensation of CA$12m for the year to October 2020. We note that's a small decrease of 3.3% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at CA$1.3m.
On comparing similar companies in the industry with market capitalizations above CA$10b, we found that the median total CEO compensation was CA$11m. From this we gather that Brian Porter is paid around the median for CEOs in the industry. Furthermore, Brian Porter directly owns CA$11m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2020 | 2019 | Proportion (2020) |
Salary | CA$1.3m | CA$1.3m | 11% |
Other | CA$11m | CA$11m | 89% |
Total Compensation | CA$12m | CA$13m | 100% |
Talking in terms of the industry, salary represented approximately 11% of total compensation out of all the companies we analyzed, while other remuneration made up 89% of the pie. There isn't a significant difference between Bank of Nova Scotia and the broader market, in terms of salary allocation in the overall compensation package. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at The Bank of Nova Scotia's Growth Numbers
Over the last three years, The Bank of Nova Scotia has shrunk its earnings per share by 7.4% per year. Its revenue is down 10% over the previous year.
Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has The Bank of Nova Scotia Been A Good Investment?
With a total shareholder return of 18% over three years, The Bank of Nova Scotia shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
In Summary...
Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
Shareholders may want to check for free if Bank of Nova Scotia insiders are buying or selling shares.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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