Here's Why Essity AB (publ)'s (STO:ESSITY B) CEO Compensation Is The Least Of Shareholders Concerns

By
Simply Wall St
Published
March 18, 2022
OM:ESSITY B
Source: Shutterstock

Shareholders may be wondering what CEO Magnus Groth plans to do to improve the less than great performance at Essity AB (publ) (STO:ESSITY B) recently. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 24 March 2022. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

View our latest analysis for Essity

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

At the time of writing, our data shows that Essity AB (publ) has a market capitalization of kr162b, and reported total annual CEO compensation of kr33m for the year to December 2021. That's a notable increase of 22% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at kr16m.

On comparing similar companies in the industry with market capitalizations above kr75b, we found that the median total CEO compensation was kr84m. That is to say, Magnus Groth is paid under the industry median. What's more, Magnus Groth holds kr18m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary kr16m kr15m 48%
Other kr17m kr12m 52%
Total Compensationkr33m kr27m100%

On an industry level, around 45% of total compensation represents salary and 55% is other remuneration. Our data reveals that Essity allocates salary more or less in line with the wider market. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
OM:ESSITY B CEO Compensation March 18th 2022

Essity AB (publ)'s Growth

Essity AB (publ) has seen its earnings per share (EPS) increase by 3.0% a year over the past three years. The trailing twelve months of revenue was pretty much the same as the prior period.

We would argue that the improvement in revenue is good, but isn't particularly impressive, but the modest improvement in EPS is good. Considering these factors we'd say performance has been pretty decent, though not amazing. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Essity AB (publ) Been A Good Investment?

Given the total shareholder loss of 7.9% over three years, many shareholders in Essity AB (publ) are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Flat earnings growth may also be to blame for the uninspiring share price performance. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board and assess if the board's plan is likely to improve company performance.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 3 warning signs for Essity that investors should think about before committing capital to this stock.

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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