How Should Investors React To KONE Oyj's (HEL:KNEBV) CEO Pay?

Simply Wall St

Henrik Ehrnrooth became the CEO of KONE Oyj (HEL:KNEBV) in 2014. This analysis aims first to contrast CEO compensation with other large companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for KONE Oyj

How Does Henrik Ehrnrooth's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that KONE Oyj has a market cap of €27b, and reported total annual CEO compensation of €4.6m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at €750k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We took a group of companies with market capitalizations over €7.2b, and calculated the median CEO total compensation to be €450k. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

Thus we can conclude that Henrik Ehrnrooth receives more in total compensation than the median of a group of large companies in the same market as KONE Oyj. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

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

HLSE:KNEBV CEO Compensation, September 20th 2019

Is KONE Oyj Growing?

KONE Oyj has reduced its earnings per share by an average of 10% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 7.0% 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 KONE Oyj Been A Good Investment?

KONE Oyj has generated a total shareholder return of 26% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

We compared the total CEO remuneration paid by KONE Oyj, and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. While shareholder returns are acceptable, they don't delight. So we think more research is needed, but we don't think the CEO underpaid. So you may want to check if insiders are buying KONE Oyj shares with their own money (free access).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

If you spot an error that warrants correction, please contact the editor at 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. Thank you for reading.