Is Alfa Laval AB (publ)'s (STO:ALFA) CEO Paid At A Competitive Rate?
Tom Erixon has been the CEO of Alfa Laval AB (publ) (STO:ALFA) since 2016. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. 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.
See our latest analysis for Alfa Laval
How Does Tom Erixon's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Alfa Laval AB (publ) has a market cap of kr78b, and reported total annual CEO compensation of kr27m for the year to December 2019. We note that's an increase of 16% above last year. While we always look at total compensation first, we note that the salary component is less, at kr11m. We looked at a group of companies with market capitalizations from kr39b to kr118b, and the median CEO total compensation was kr22m.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Alfa Laval. On an industry level, roughly 58% of total compensation represents salary and 42% is other remuneration. So it seems like there isn't a significant difference between Alfa Laval and the broader market, in terms of salary allocation in the overall compensation package.
That means Tom Erixon 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. You can see, below, how CEO compensation at Alfa Laval has changed over time.
Is Alfa Laval AB (publ) Growing?
Over the last three years Alfa Laval AB (publ) has seen earnings per share (EPS) move in a positive direction by an average of 32% per year (using a line of best fit). In the last year, its revenue is up 12%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. It could be important to check this free visual depiction of what analysts expect for the future.
Has Alfa Laval AB (publ) Been A Good Investment?
With a total shareholder return of 7.8% over three years, Alfa Laval AB (publ) has done okay by shareholders. 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...
Tom Erixon is paid around what is normal for the leaders of comparable size companies.
Shareholder returns could be better but shareholders would be pleased with the positive EPS growth. So considering these factors, we think the CEO pay is probably quite reasonable. Looking into other areas, we've picked out 1 warning sign for Alfa Laval 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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