Most Shareholders Will Probably Agree With Alfa Laval AB (publ)'s (STO:ALFA) CEO Compensation

Performance at Alfa Laval AB (publ) (STO:ALFA) has been reasonably good and CEO Tom Erixon has done a decent job of steering the company in the right direction. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 27 April 2021. Here is our take on why we think the CEO compensation looks appropriate.

See our latest analysis for Alfa Laval

Comparing Alfa Laval AB (publ)'s CEO Compensation With the industry

At the time of writing, our data shows that Alfa Laval AB (publ) has a market capitalization of kr116b, and reported total annual CEO compensation of kr32m for the year to December 2020. That's a notable increase of 19% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at kr14m.

In comparison with other companies in the industry with market capitalizations over kr67b , the reported median total CEO compensation was kr31m. This suggests that Alfa Laval remunerates its CEO largely in line with the industry average. Moreover, Tom Erixon also holds kr27m worth of Alfa Laval stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 60% of total compensation represents salary and 40% is other remuneration. In Alfa Laval's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Alfa Laval AB (publ)'s Growth

Alfa Laval AB (publ)'s earnings per share (EPS) grew 6.1% per year over the last three years. In the last year, its revenue is down 11%.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. 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 Alfa Laval AB (publ) Been A Good Investment?

With a total shareholder return of 26% over three years, Alfa Laval AB (publ) shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, we still think that any proposed increase in CEO compensation will be examined closely to make sure the compensation is appropriate and linked to performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Alfa Laval that investors should be aware of in a dynamic business environment.

Switching gears from Alfa Laval, 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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