What has SIX’s performance been like?Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Recently, SIX released negative earnings of -AU$3.33M . However, this is an improvement on prior year’s loss of -AU$3.75M, which may signal a turnaround since SIX has been loss-making for the past five years, on average, with an EPS of -AU$0.30. Since earnings are heading towards the right direction, CEO pay should mirror White’s valued-adding activities. Over the same period White’s total compensation remained stable at AU$224.00K since the previous year.
Is SIX’s CEO overpaid relative to the market?
Despite the fact that one size does not fit all, as compensation should account for specific factors of the company and market, we can determine a high-level yardstick to see if SIX is an outlier. This outcome helps investors ask the right question about White’s incentive alignment. Generally, an Australian small-cap is worth around $140M, creates earnings of $10M, and remunerates its CEO at roughly $500,000 per year. Normally I’d use market cap and profit as factors determining performance, however, SIX’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like White is being paid within the bounds of reasonableness. Putting everything together, even though SIX is loss-making, it seems like the CEO’s pay is appropriate.
Hopefully this article has given you insight on how shareholders should think about SIX’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. 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 SIX’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 SIX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!