We Think Shareholders May Want To Consider A Review Of Fortum Oyj's (HEL:FORTUM) CEO Compensation Package

Key Insights

• Fortum Oyj will host its Annual General Meeting on 25th of March
• CEO Markus Rauramo's total compensation includes salary of €1.61m
• The total compensation is 69% higher than the average for the industry
• Fortum Oyj's EPS declined by 6.3% over the past three years while total shareholder loss over the past three years was 37%

The results at Fortum Oyj (HEL:FORTUM) have been quite disappointing recently and CEO Markus Rauramo bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 25th of March. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for Fortum Oyj

How Does Total Compensation For Markus Rauramo Compare With Other Companies In The Industry?

Our data indicates that Fortum Oyj has a market capitalization of €11b, and total annual CEO compensation was reported as €3.1m for the year to December 2023. That is, the compensation was roughly the same as last year. We note that the salary of €1.61m makes up a sizeable portion of the total compensation received by the CEO.

On comparing similar companies in the Finland Electric Utilities industry with market capitalizations above €7.4b, we found that the median total CEO compensation was €1.8m. Hence, we can conclude that Markus Rauramo is remunerated higher than the industry median. Furthermore, Markus Rauramo directly owns €1.3m worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	€1.6m	€1.5m	53%
Other	€1.5m	€1.5m	47%
Total Compensation	€3.1m	€3.0m	100%

On an industry level, roughly 56% of total compensation represents salary and 44% is other remuneration. Fortum Oyj is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Fortum Oyj's Growth

Over the last three years, Fortum Oyj has shrunk its earnings per share by 6.3% per year. It saw its revenue drop 14% over the last year.

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. 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 Fortum Oyj Been A Good Investment?

With a total shareholder return of -37% over three years, Fortum Oyj shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 2 warning signs for Fortum Oyj (1 is a bit unpleasant!) that you should be aware of before investing here.

Important note: Fortum Oyj is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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.