TSXV:BER Past Future Earnings Jan 31st 18
Is BER overpaying the CEO?
Even though there is no cookie-cutter approach, as compensation should be tailored to the specific company and market, we can determine a high-level benchmark to see if BER is an outlier. This exercise can help shareholders ask the right question about Pereira’s incentive alignment. Typically, a Canadian small-cap is worth around $345M, produces earnings of $24M, and pays its CEO at roughly $770,000 annually. Typically I would use earnings and market cap to account for variations in performance, however, BER’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Pereira is remunerated sensibly relative to peers. On the whole, though BER is loss-making, it seems like the CEO’s pay is fair.
Next Steps:
My conclusion is that Pereira is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. If you have not done so already, I urge you to complete your research by taking a look at the following:
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.