ASX:REZ Income Statement Dec 13th 17
More Is REZ overpaying the CEO? Despite the fact that no standard benchmark exists, since remuneration should account for specific factors of the company and market, we can evaluate a high-level yardstick to see if REZ is an outlier. This exercise can help shareholders ask the right question about Poole’s incentive alignment. Normally, an Australian small-cap has a value of $140M, generates earnings of $10M, and pays its CEO circa $500,000 per year. Usually I’d use market cap and profit as factors determining performance, however, REZ’s negative earnings reduces the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Poole is paid aptly compared to those in similar-sized companies. On the whole, even though REZ is loss-making, it seems like the CEO’s pay is sound.
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 Poole 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 REZ’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 Poole’s pay is above or below peers, the more important factors to look at is REZ’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 REZ’s financial metrics.
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