ASX:SDL Past Future Earnings Dec 2nd 17
What’s a reasonable CEO compensation?
Though there is no cookie-cutter approach, since compensation should account for specific factors of the company and market, we can estimate a high-level benchmark to see if SDL is an outlier. This exercise helps investors ask the right question about Casello’s incentive alignment. Normally, an Australian small-cap has a value of $140M, creates earnings of $10M, and pays its CEO at roughly $500,000 annually. Typically I’d use market cap and profit as factors determining performance, however, SDL’s negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Casello’s pay exceeds its peer group.
What this means for you:
Are you a shareholder? The next CEO pay bump should be questioned by shareholders at AGM voting. Given that Casello’s pay is already above the bracket of other CEOs of similar companies, what justifies a further increase? Although CEO pay is not the be all and end all, it serves as a signal as to whether the board’s and management’s incentives are aligned with the rest of the shareholders. To find out more about SDL’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in SDL, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. To research more about these fundamentals, I recommend you check out our simple infographic report on SDL’s financial metrics.
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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.