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Is Wärtsilä Oyj Abp’s (HEL:WRT1V) CEO Pay Fair?

Jaakko Eskola became the CEO of Wärtsilä Oyj Abp (HEL:WRT1V) in 2015. 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. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Wärtsilä Oyj Abp

How Does Jaakko Eskola’s Compensation Compare With Similar Sized Companies?

Our data indicates that Wärtsilä Oyj Abp is worth €8.3b, and total annual CEO compensation is €1.2m. (This figure is for the year to 2017). While we always look at total compensation first, we note that the salary component is less, at €785k. When we examined a selection of companies with market caps ranging from €3.5b to €11b, we found the median CEO compensation was €927k.

It would therefore appear that Wärtsilä Oyj Abp pays Jaakko Eskola more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at Wärtsilä Oyj Abp has changed over time.

HLSE:WRT1V CEO Compensation December 11th 18

Is Wärtsilä Oyj Abp Growing?

Earnings per share at Wärtsilä Oyj Abp are much the same as they were three years ago, albeit slightly higher. In the last year, its revenue is up 1.5%.

I would argue that the improvement in revenue isn’t particularly impressive, but the modest improvement in EPS is good. Considering these factors I’d say performance has been pretty decent, though not amazing.

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

Has Wärtsilä Oyj Abp Been A Good Investment?

Wärtsilä Oyj Abp has generated a total shareholder return of 12% over three years, so most shareholders would 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.

In Summary…

We compared total CEO remuneration at Wärtsilä Oyj Abp with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

One might like to have seen stronger growth, and the shareholder returns have failed to inspire, over the last three years. Considering this, we wouldn’t want to see any big pay rises, although we’d stop short of calling the CEO compensation unfair. Whatever your view on compensation, you might want to check if insiders are buying or selling Wärtsilä Oyj Abp shares (free trial).

Of course, the past can be informative so you might be interested in considering this analytical visualization showing the company history of earnings and revenue.

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.