What has MBRX performance been like?Earnings is a powerful indication of MBRX’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Klemp’s performance in the past year. Over the last year MBRX delivered negative earnings of -$8M , which is a further decline from prior year’s loss of -$3M. Moreover, on average, MBRX has been loss-making in the past, with a 5-year average EPS of -$0.4. In the situation of negative earnings, the company may be going through a period of reinvestment and growth, or it can be a sign of some headwind. Regardless, CEO compensation should be reflective of the current condition of the business. In the latest financial statments, Klemp’s total remuneration more than doubled, reaching $175,000 , although from a small basis. Although I couldn’t find information on the composition of Klemp’s pay, if some portion were non-cash items such as stocks and options, then variabilities in MBRX’s share price can move the actual level of what the CEO actually collects at the end of the year.
What’s a reasonable CEO compensation?
Even though no standard benchmark exists, as remuneration should be tailored to the specific company and market, we can gauge a high-level thresold to see if MBRX is an outlier. This outcome helps investors ask the right question about Klemp’s incentive alignment. Generally, a US small-cap is worth around $1B, creates earnings of $96M, and pays its CEO circa $2.7M per annum. Usually I would look at market cap and earnings as a proxy for performance, however, MBRX’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Klemp is paid aptly compared to those in similar-sized companies. On the whole, although MBRX is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
What this means for you:
Are you a shareholder? 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 Klemp’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. To find out more about MBRX’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 Klemp’s incentives are well-aligned with MBRX’s shareholders, it is certainly not sufficient to base your investment decision solely on this factor. Whether the company is fundamentally strong depends on MBRX’s financial health and its future outlook. To research more about these fundamentals, I recommend you check out our simple infographic report on MBRX’s financial metrics.PS. If you are not interested in Moleculin Biotech anymore, you can use our free platform to see my list of over 50 sustainable companies producing great returns.