ASX:GMR Income Statement Dec 4th 17
Is GMR’s CEO overpaid relative to the market?
Though there is no cookie-cutter approach, as compensation should account for specific factors of the company and market, we can evaluate a high-level yardstick to see if GMR deviates substantially from its peers. This exercise helps investors ask the right question about Mackay’s incentive alignment. Typically, an Australian small-cap is worth around $140M, generates earnings of $10M, and remunerates its CEO at roughly $500,000 per year. Usually I would look at market cap and earnings as a proxy for performance, however, GMR’s negative earnings reduces the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Mackay is remunerated sensibly relative to peers. On the whole, although GMR is unprofitable, it seems like the CEO’s pay is reflective of the appropriate level.
What this means for you:
Are you a shareholder? CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Mackay remunerated appropriately based on other factors we have not covered today? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. To find out more about GMR’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? While CEO compensation is a good indication for how well-aligned the company leader is its investors, it is certainly not enough to simply base your investment decision on this metric. Regardless of whether Mackay’s pay is above or below peers, the more important factors to look at is GMR’s track record of performance and future outlook moving forward. To research more about these fundamentals, I recommend you check out our simple infographic report on GMR’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.