U.S. Markets close in 6 hrs 6 mins

Is Telefonaktiebolaget LM Ericsson (publ)'s (STO:ERIC B) CEO Salary Justified?

Simply Wall St

E. Ekholm has been the CEO of Telefonaktiebolaget LM Ericsson (publ) (STO:ERIC B) since 2017. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Telefonaktiebolaget LM Ericsson

How Does E. Ekholm's Compensation Compare With Similar Sized Companies?

Our data indicates that Telefonaktiebolaget LM Ericsson (publ) is worth kr289b, and total annual CEO compensation was reported as kr738k for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at . We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over kr76b, we found that their median CEO total compensation was kr18m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

A first glance this seems like a real positive for shareholders, since E. Ekholm is paid less than the average total compensation paid by other large companies. However, before we heap on the praise, we should delve deeper to understand business performance.

You can see a visual representation of the CEO compensation at Telefonaktiebolaget LM Ericsson, below.

OM:ERIC B CEO Compensation, December 4th 2019

Is Telefonaktiebolaget LM Ericsson (publ) Growing?

On average over the last three years, Telefonaktiebolaget LM Ericsson (publ) has shrunk earnings per share by 12% each year (measured with a line of best fit). It achieved revenue growth of 9.6% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has Telefonaktiebolaget LM Ericsson (publ) Been A Good Investment?

I think that the total shareholder return of 84%, over three years, would leave most Telefonaktiebolaget LM Ericsson (publ) shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

It appears that Telefonaktiebolaget LM Ericsson (publ) remunerates its CEO below most large companies.

E. Ekholm receives relatively low remuneration compared to most large companies. And while the company isn't growing earnings per share, total returns have been pleasing. We would like to see EPS growth, but in our view it seems the CEO is remunerated reasonably. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Telefonaktiebolaget LM Ericsson (free visualization of insider trades).

Important note: Telefonaktiebolaget LM Ericsson may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.