The Xero Ltd (ASX: XRO) share price’s performance has led to the company deciding to increase the remuneration for its CEO.
Xero is one of the ASX’s largest technology companies. It provides accounting and business operations software.
Xero’s CEO gets a pay rise
The board of Xero decided to change CEO Sukhinder Singh Cassidy’s remuneration to “recognise her strong performance, ensure it is appropriately aligned to market benchmarks for globally comparable technology companies and that it continues to focus on incentivising long-term value creation.”
Cassidy joined Xero in November 2022 and started as CEO in February 2023. Since then, Xero has consistently achieved revenue growth of more than 20%, increased the cash flow margin to 21% and delivered a ‘rule of 40’ of 41% and 43.9% in FY24 and the first half of FY25, respectively. A rule of 40 is a total of revenue and cash flow margin.
Between 10 November 2022 and 13 December 2024, the total shareholder return (TSR) for Xero shares was 161%.
The board looked at things like performance, scope, criticality of the role and location. It also looked at global benchmarking data and feedback from consultation from a range of stakeholders on the construction of the CEO’s package, including institutional investors and proxy outfits.
The base salary and associated target short-term incentives will be reduced from US$735,000 to US$540,000. The long-term incentive and long-term equity target opportunity for FY26 has been increased to US$14.1 million. Cassidy will also receive a one-off grant of 575,000 options with an exercise price of AU$171.11 which will vest in three equal tranches.
Leadership commentary
The Chair of Xero, David Thodey said:
The Board is committed to linking pay with performance, and attracting and retaining global talent to achieve our global strategy and aspirations for Xero. Sukhinder has made an exceptional contribution towards these ambitions since joining Xero two years ago. Under Sukhinder’s leadership, Xero has focused the team on delivering growth and profitability, attracted leading global expertise, set out a clear strategic vision to position Xero strongly for the future, and delivered consecutive greater than Rule of 40 outcomes.
Xero aspires to be a world-class global SaaS business. Recruiting and retaining global SaaS leaders — a concentration of whom are US-based — in a competitive international market is essential to delivering the high performance we need to drive long-term shareholder value.
Final thoughts on the Xero share price
Xero has done wonderfully for shareholders, though perhaps it’s not too surprising with investors valuing many of the global tech growth names at high prices.
The software business has done well to continue executing on its growth plans, while also balancing profitability. It’s what investors wanted to see. But, I wouldn’t call the Xero share price good value today because of how far it has risen in a short amount of time. There are other ASX growth shares I’d rather buy.
