Does KONE Oyj's (HEL:KNEBV) CEO Pay Matter?
In 2014 Henrik Ehrnrooth was appointed CEO of KONE Oyj (HEL:KNEBV). First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
See our latest analysis for KONE Oyj
How Does Henrik Ehrnrooth's Compensation Compare With Similar Sized Companies?
Our data indicates that KONE Oyj is worth €25b, and total annual CEO compensation was reported as €4.3m for the year to December 2019. That's below the compensation, last year. While we always look at total compensation first, we note that the salary component is less, at €750k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over €7.4b and the median CEO total compensation was €3.9m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of KONE Oyj. Talking in terms of the sector, salary represented approximately 83% of total compensation out of all the companies we analysed, while other remuneration made up 17% of the pie. KONE Oyj sets aside a smaller share of compensation for salary, in comparison to the overall industry.
That means Henrik Ehrnrooth receives fairly typical remuneration for the CEO of a large company. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. The graphic below shows how CEO compensation at KONE Oyj has changed from year to year.
Is KONE Oyj Growing?
Over the last three years KONE Oyj has shrunk its earnings per share by an average of 7.2% per year (measured with a line of best fit). Its revenue is up 10% over last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for me to put aside my concerns around earnings. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has KONE Oyj Been A Good Investment?
Boasting a total shareholder return of 34% over three years, KONE Oyj has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
In Summary...
Henrik Ehrnrooth is paid around what is normal for the leaders of larger companies.
We feel that earnings per share have been a bit disappointing, but it's nice to see positive shareholder returns over the last three years. So we can't see a reason to suggest the pay is inappropriate. Looking into other areas, we've picked out 2 warning signs for KONE Oyj that investors should think about before committing capital to this stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
