TSXV:GSA Income Statement Dec 15th 17
Is GSA’s CEO overpaid relative to the market?
While one size does not fit all, since remuneration should be tailored to the specific company and market, we can fashion a high-level thresold to see if GSA deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Pfeifer’s incentive alignment. Normally, a Canadian small-cap has a value of $345M, produces earnings of $24M, and remunerates its CEO circa $770,000 per annum. Typically I would look at market cap and earnings as a proxy for performance, however, GSA’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Pfeifer is being paid within the bounds of reasonableness. Putting everything together, although GSA is loss-making, it seems like the CEO’s pay is appropriate.
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 Pfeifer 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 GSA’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Although remuneration can be a useful gauge of whether Pfeifer’s incentives are well-aligned with GSA’s shareholders, it is certainly not sufficient to base your investment decision solely on this factor. Whether the company is fundamentally strong depends on GSA’s financial health and its future outlook. To research more about these fundamentals, I recommend you check out our simple infographic report on GSA’s financial metrics.
PS. If you are not interested in Groundstar Resources anymore, you can use our free platform to see my list of over 50 sustainable companies producing great returns.
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.