We Think The Compensation For Össur hf.'s (CPH:OSSR) CEO Looks About Right

The share price of Össur hf. (CPH:OSSR) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 08 March 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Össur hf

Comparing Össur hf.'s CEO Compensation With the industry

According to our data, Össur hf. has a market capitalization of kr.18b, and paid its CEO total annual compensation worth US$1.4m over the year to December 2020. We note that's a decrease of 14% compared to last year. In particular, the salary of US$956.0k, makes up a huge portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the industry with market capitalizations between kr.12b and kr.39b, we discovered that the median CEO total compensation of that group was US$1.3m. From this we gather that Jón Sigurdsson is paid around the median for CEOs in the industry. Furthermore, Jón Sigurdsson directly owns kr.39m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	US$956k	US$1.1m	66%
Other	US$493k	US$611k	34%
Total Compensation	US$1.4m	US$1.7m	100%

Talking in terms of the industry, salary represented approximately 56% of total compensation out of all the companies we analyzed, while other remuneration made up 44% of the pie. Össur hf pays out 66% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Össur hf.'s Growth Numbers

Over the last three years, Össur hf. has shrunk its earnings per share by 52% per year. In the last year, its revenue is down 8.3%.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Össur hf. Been A Good Investment?

Boasting a total shareholder return of 59% over three years, Össur hf. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

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.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 3 warning signs for Össur hf that investors should think about before committing capital to this stock.

Switching gears from Össur hf, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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