ASX:TRY Income Statement Dec 18th 17
What’s a reasonable CEO compensation?
Though no standard benchmark exists, since compensation should be tailored to the specific company and market, we can fashion a high-level benchmark to see if TRY deviates substantially from its peers. This exercise helps investors ask the right question about Nilsson’s incentive alignment. Normally, an Australian small-cap is worth around $140M, creates earnings of $10M, and remunerates its CEO at roughly $500,000 per year. Normally I would look at market cap and earnings as a proxy for performance, however, TRY’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Nilsson’s pay outstrips those in comparable companies.
What this means for you:
Are you a shareholder? TRY may be paying its CEO above-market rates due to many reasons – retention, reward, or inflated non-cash components of total pay. However, shareholders also should be aware of what the appropriate level is. Boards should be transparent with how they structure CEO pay given that there should be nothing to hide in public companies. Hopefully this analysis has given you the basis for questioning the next CEO pay raise. To find out more about TRY’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 Nilsson’s pay is above or below peers, the more important factors to look at is TRY’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 TRY’s financial metrics.
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The author is an independent contributor and at the time of publication had no position in the stocks mentioned.