Shareholders May Find It Hard To Justify A Pay Rise For freenet AG's (ETR:FNTN) CEO This Year

The share price of freenet AG (ETR:FNTN) has struggled to grow by much over the last few years and probably has to do with the fact that earnings growth has gone backwards. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 18 June 2021. 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. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for freenet

Comparing freenet AG's CEO Compensation With the industry

Our data indicates that freenet AG has a market capitalization of €2.9b, and total annual CEO compensation was reported as €3.5m for the year to December 2020. Notably, that's an increase of 33% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at €1.0m.

In comparison with other companies in the industry with market capitalizations ranging from €1.7b to €5.3b, the reported median CEO total compensation was €3.5m. This suggests that freenet remunerates its CEO largely in line with the industry average.

Component	2020	2019	Proportion (2020)
Salary	€1.0m	€1.0m	28%
Other	€2.5m	€1.6m	72%
Total Compensation	€3.5m	€2.6m	100%

On an industry level, around 28% of total compensation represents salary and 72% is other remuneration. Our data reveals that freenet allocates salary more or less in line with the wider market. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

freenet AG's Growth

Over the last three years, freenet AG has shrunk its earnings per share by 12% per year. In the last year, its revenue is down 12%.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has freenet AG Been A Good Investment?

freenet AG has not done too badly by shareholders, with a total return of 3.7%, over three years. It would be nice to see that metric improve in the future. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.

To Conclude...

The flat share price growth combined with the the fact that earnings have failed to grow makes us wonder whether the share price will have any further strong momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for freenet that you should be aware of before investing.

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.

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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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