Here's Why Essity AB (publ)'s (STO:ESSITY B) CEO May Have Their Pay Bumped Up

Key Insights

• Essity's Annual General Meeting to take place on 29th of March
• Salary of kr16.5m is part of CEO Magnus Groth's total remuneration
• The total compensation is 55% less than the average for the industry
• Over the past three years, Essity's EPS fell by 15% and over the past three years, the total shareholder return was 11%

Shareholders will be pleased by the robust performance of Essity AB (publ) (STO:ESSITY B) recently and this will be kept in mind in the upcoming AGM on 29th of March. The focus will probably be on the future strategic initiatives that the board and management will put in place to improve the business rather than executive remuneration when they cast their votes on company resolutions. Here is our take on why we think CEO compensation is fair and may even warrant a raise.

See our latest analysis for Essity

How Does Total Compensation For Magnus Groth Compare With Other Companies In The Industry?

At the time of writing, our data shows that Essity AB (publ) has a market capitalization of kr206b, and reported total annual CEO compensation of kr38m for the year to December 2022. Notably, that's an increase of 16% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at kr17m.

On comparing similar companies in the Sweden Household Products industry with market capitalizations above kr83b, we found that the median total CEO compensation was kr84m. In other words, Essity pays its CEO lower than the industry median. Furthermore, Magnus Groth directly owns kr23m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2022	2021	Proportion (2022)
Salary	kr17m	kr16m	43%
Other	kr22m	kr17m	57%
Total Compensation	kr38m	kr33m	100%

On an industry level, around 69% of total compensation represents salary and 31% is other remuneration. In Essity's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Essity AB (publ)'s Growth Numbers

Essity AB (publ) has reduced its earnings per share by 15% a year over the last three years. It achieved revenue growth of 28% over the last year.

Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one 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 Essity AB (publ) Been A Good Investment?

With a total shareholder return of 11% over three years, Essity 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.

To Conclude...

While the company seems to be headed in the right direction performance-wise, there's always room for improvement. Assuming the business continues to grow at a good clip, few shareholders would raise any objections to the CEO's remuneration. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Essity (1 is significant!) that you should be aware of before investing here.

Important note: Essity 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.