TSXV:FRI Past Future Earnings Feb 6th 18
Is FRI’s CEO overpaid relative to the market?
While no standard benchmark exists, since remuneration should account for specific factors of the company and market, we can determine a high-level thresold to see if FRI is an outlier. This exercise can help shareholders ask the right question about Clark’s incentive alignment. On average, a Canadian small-cap has a value of $345M, creates earnings of $24M, and pays its CEO circa $770,000 per annum. Normally I would use earnings and market cap to account for variations in performance, however, FRI’s negative earnings lower the usefulness of my formula. Looking at the range of compensation for small-cap executives, it seems like Clark is remunerated sensibly relative to peers. On the whole, although FRI is unprofitable, it seems like the CEO’s pay is reflective of the appropriate level.
Next Steps:
In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Clark’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I urge you to complete your research by taking a look at the following:
To help readers see pass 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.