We Think Shareholders May Want To Consider A Review Of Merck KGaA's (ETR:MRK) CEO Compensation Package

Key Insights

• Merck KGaA to hold its Annual General Meeting on 25th of April
• CEO Belen Garijo Lopez's total compensation includes salary of €1.50m
• Total compensation is similar to the industry average
• Merck KGaA's EPS declined by 3.1% over the past three years while total shareholder loss over the past three years was 31%

We check all companies for important risks. See what we found for Merck KGaA in our free report.

The results at Merck KGaA (ETR:MRK) have been quite disappointing recently and CEO Belen Garijo Lopez bears some responsibility for this. At the upcoming AGM on 25th of April, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for Merck KGaA

Comparing Merck KGaA's CEO Compensation With The Industry

Our data indicates that Merck KGaA has a market capitalization of €51b, and total annual CEO compensation was reported as €6.8m for the year to December 2024. We note that's a decrease of 36% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €1.5m.

On comparing similar companies in the German Pharmaceuticals industry with market capitalizations above €7.0b, we found that the median total CEO compensation was €8.8m. From this we gather that Belen Garijo Lopez is paid around the median for CEOs in the industry.

On an industry level, roughly 54% of total compensation represents salary and 46% is other remuneration. In Merck KGaA's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Merck KGaA's Growth Numbers

Over the last three years, Merck KGaA has shrunk its earnings per share by 3.1% per year. Revenue was pretty flat on last year.

The decline in EPS is a bit concerning. And the flat revenue hardly impresses. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Merck KGaA Been A Good Investment?

With a total shareholder return of -31% over three years, Merck KGaA shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

So you may want to check if insiders are buying Merck KGaA shares with their own money (free access).

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.