Is Sandvik AB (STO:SAND) Overpaying Its CEO?

By
Simply Wall St
Published
January 23, 2019
OM:SAND

Björn Klas Rosengren has been the CEO of Sandvik AB (STO:SAND) since 2015. This analysis aims first to contrast CEO compensation with other large companies. 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. This process should give us an idea about how appropriately the CEO is paid.

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How Does Björn Klas Rosengren's Compensation Compare With Similar Sized Companies?

According to our data, Sandvik AB has a market capitalization of kr177b, and pays its CEO total annual compensation worth kr36m. (This number is for the twelve months until 2017). While we always look at total compensation first, we note that the salary component is less, at kr14m. When we examined a group of companies with market caps over kr72b, we found that their median CEO compensation was kr26m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

Thus we can conclude that Björn Klas Rosengren receives more in total compensation than the median of a group of large companies in the same market as Sandvik AB. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

The graphic below shows how CEO compensation at Sandvik has changed from year to year.

OM:SAND CEO Compensation January 23rd 19
OM:SAND CEO Compensation January 23rd 19

Is Sandvik AB Growing?

Sandvik AB has increased its earnings per share (EPS) by an average of 49% a year, over the last three years (using a line of best fit). Its revenue is up 10% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing.

You might want to check this free visual report on analyst forecasts for future earnings.

Has Sandvik AB Been A Good Investment?

Most shareholders would probably be pleased with Sandvik AB for providing a total return of 111% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We examined the amount Sandvik AB pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark group.

However, the earnings per share growth over three years is certainly impressive. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. Shareholders may want to check for free if Sandvik insiders are buying or selling shares.

Or you might prefer gaze uponthis detailed graph of past earnings, revenue and cash flow .

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.

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