Here's Why Shareholders Should Examine Fraport AG's (ETR:FRA) CEO Compensation Package More Closely

By
Simply Wall St
Published
May 25, 2021
XTRA:FRA
Source: Shutterstock

Fraport AG (ETR:FRA) has not performed well recently and CEO Stefan Schulte will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 01 June 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Fraport

Comparing Fraport AG's CEO Compensation With the industry

According to our data, Fraport AG has a market capitalization of €5.3b, and paid its CEO total annual compensation worth €2.1m over the year to December 2020. That's a notable decrease of 14% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at €715k.

On comparing similar companies from the same industry with market caps ranging from €3.3b to €9.8b, we found that the median CEO total compensation was €1.4m. Hence, we can conclude that Stefan Schulte is remunerated higher than the industry median.

Component20202019Proportion (2020)
Salary €715k €415k 34%
Other €1.4m €2.0m 66%
Total Compensation€2.1m €2.4m100%

On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. Fraport pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
XTRA:FRA CEO Compensation May 26th 2021

Fraport AG's Growth

Over the last three years, Fraport AG has shrunk its earnings per share by 81% per year. It saw its revenue drop 60% over the last year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Fraport AG Been A Good Investment?

With a three year total loss of 26% for the shareholders, Fraport AG would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Fraport 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.

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