Most Shareholders Will Probably Agree With KONE Oyj's (HEL:KNEBV) CEO Compensation

Key Insights

• KONE Oyj to hold its Annual General Meeting on 28th of February
• CEO Henrik Ehrnrooth's total compensation includes salary of €750.0k
• Total compensation is 34% below industry average
• KONE Oyj's total shareholder return over the past three years was 1.3% while its EPS was down 6.0% over the past three years

Performance at KONE Oyj (HEL:KNEBV) has been rather uninspiring recently and shareholders may be wondering how CEO Henrik Ehrnrooth plans to fix this. At the next AGM coming up on 28th of February, they can influence managerial decision making through voting on resolutions, including executive remuneration. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

Check out our latest analysis for KONE Oyj

Comparing KONE Oyj's CEO Compensation With The Industry

At the time of writing, our data shows that KONE Oyj has a market capitalization of €25b, and reported total annual CEO compensation of €1.6m for the year to December 2022. We note that's a decrease of 63% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €750k.

For comparison, other companies in the Finnish Machinery industry with market capitalizations above €7.5b, reported a median total CEO compensation of €2.4m. This suggests that Henrik Ehrnrooth is paid below the industry median. What's more, Henrik Ehrnrooth holds €19m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2022	2021	Proportion (2022)
Salary	€750k	€750k	47%
Other	€835k	€3.5m	53%
Total Compensation	€1.6m	€4.3m	100%

Speaking on an industry level, nearly 49% of total compensation represents salary, while the remainder of 51% is other remuneration. There isn't a significant difference between KONE Oyj and the broader market, in terms of salary allocation in the overall compensation package. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at KONE Oyj's Growth Numbers

KONE Oyj has reduced its earnings per share by 6.0% a year over the last three years. It achieved revenue growth of 3.7% over the last year.

The decline in EPS is a bit concerning. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. 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 KONE Oyj Been A Good Investment?

KONE Oyj has generated a total shareholder return of 1.3% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

In Summary...

While it's true that shareholders have seen decent returns, it's hard to overlook the lack of earnings growth and this makes us wonder if the current returns can continue. These concerns could be addressed to the board and shareholders should revisit their investment thesis to see if it still makes sense.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for KONE Oyj that investors should be aware of in a dynamic business environment.

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. 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.