Elma Electronic AG's (VTX:ELMN) CEO Compensation Looks Acceptable To Us And Here's Why

Key Insights

• Elma Electronic to hold its Annual General Meeting on 18th of April
• Salary of CHF340.0k is part of CEO Thomas Herrmann's total remuneration
• The overall pay is comparable to the industry average
• Elma Electronic's total shareholder return over the past three years was 90% while its EPS was down 3.5% over the past three years

Despite strong share price growth of 90% for Elma Electronic AG (VTX:ELMN) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 18th of April. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Elma Electronic

Comparing Elma Electronic AG's CEO Compensation With The Industry

At the time of writing, our data shows that Elma Electronic AG has a market capitalization of CHF233m, and reported total annual CEO compensation of CHF552k for the year to December 2023. That's a notable increase of 21% on last year. We note that the salary portion, which stands at CHF340.0k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the Swiss Electronic industry with market capitalizations ranging between CHF91m and CHF364m had a median total CEO compensation of CHF539k. This suggests that Elma Electronic remunerates its CEO largely in line with the industry average.

Component	2023	2022	Proportion (2023)
Salary	CHF340k	CHF315k	62%
Other	CHF212k	CHF142k	38%
Total Compensation	CHF552k	CHF457k	100%

Talking in terms of the industry, salary represented approximately 41% of total compensation out of all the companies we analyzed, while other remuneration made up 59% of the pie. It's interesting to note that Elma Electronic pays out a greater portion of remuneration through salary, compared to the industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Elma Electronic AG's Growth

Over the last three years, Elma Electronic AG has shrunk its earnings per share by 3.5% per year. Its revenue is up 8.1% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Elma Electronic AG Been A Good Investment?

Boasting a total shareholder return of 90% over three years, Elma Electronic AG 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...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Elma Electronic that investors should look into moving forward.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.