TSXV:FMM Income Statement Mar 14th 18
What’s a reasonable CEO compensation?
Despite the fact that there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can fashion a high-level yardstick to see if FMM is an outlier. This exercise helps investors ask the right question about Williams’s incentive alignment. Typically, a Canadian small-cap has a value of $345M, generates earnings of $24M, and remunerates its CEO circa $770,000 per annum. Usually I would look at market cap and earnings as a proxy for performance, however, FMM’s negative earnings reduces the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Williams is remunerated sensibly relative to peers. On the whole, even though FMM is unprofitable, it seems like the CEO’s pay is fair.
Next Steps:
In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Williams’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about FMM’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FMM? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.