Is Faron Pharmaceuticals Oy’s (LON:FARN) CEO Salary Justified?

Markku Jalkanen has been the CEO of Faron Pharmaceuticals Oy (LON:FARN) since 2007. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we’ll consider growth that the business demonstrates. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Faron Pharmaceuticals Oy

How Does Markku Jalkanen’s Compensation Compare With Similar Sized Companies?

Our data indicates that Faron Pharmaceuticals Oy is worth UK£17m, and total annual CEO compensation is €281k. (This figure is for the year to 2016). We think total compensation is more important but we note that the CEO salary is lower, at €188k. We took a group of companies with market capitalizations below €175m, and calculated the median CEO compensation to be €273k.

That means Markku Jalkanen receives fairly typical remuneration for the CEO of a company that size. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. So this free visual report on analyst forecasts could hold they key to an excellent investment decision.

The graphic below shows how CEO compensation at Faron Pharmaceuticals Oy has changed from year to year.

AIM:FARN CEO Compensation January 3rd 19
AIM:FARN CEO Compensation January 3rd 19

Is Faron Pharmaceuticals Oy Growing?

On average over the last three years, Faron Pharmaceuticals Oy has shrunk earnings per share by 49% each year. Its revenue is down -61% over last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO.

Has Faron Pharmaceuticals Oy Been A Good Investment?

With a three year total loss of 77%, Faron Pharmaceuticals Oy would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

Markku Jalkanen is paid around the same as most CEOs of similar size companies.

The company isn’t growing EPS, and shareholder returns have been disappointing. Most would consider it prudent for the company to hold off any CEO pay rise until performance improves. So you may want to check if insiders are buying Faron Pharmaceuticals Oy shares with their own money (free access).

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.