Did Wong create value?
PGY can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor's ability to sell their shares at higher capital gains. Most recently, PGY delivered negative earnings of -A$1.4M . But this is an improvement on prior year’s loss of -A$3.2M, which may signal a turnaround since PGY has been loss-making for the past five years, on average, with an EPS of -A$1.99. Given earnings are moving the right way, CEO pay should represent Wong's valued-adding activities. During the same period, Wong's total compensation more than doubled, reaching A$85,567 , but from a small number.What's a reasonable CEO compensation?
While there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can evaluate a high-level benchmark to see if PGY is an outlier. This exercise can help direct shareholders to ask the right question about Wong’s incentive alignment. Typically, an Australian small-cap has a value of $140M, generates earnings of $10M, and remunerates its CEO circa $500,000 per year. Typically I would look at market cap and earnings as a proxy for performance, however, PGY's negative earnings lower the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Wong is remunerated sensibly relative to peers. Overall, though PGY is unprofitable, it seems like the CEO’s pay is appropriate.
What this means for you:
Are you a shareholder? My conclusion is that Wong 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. To find out more about PGY's governance, look through our infographic report of the company's board and management.
Are you a potential investor? Board members are the voice of shareholders. Although CEO pay doesn't necessarily make a big dent in your investment thesis in PGY, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. To research more about these fundamentals, I recommend you check out our simple infographic report on PGY's financial metrics.
PS. If you are not interested in Pilot Energy anymore, you can use our free platform to see my list of over 50 sustainable companies producing great returns.New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Market Insights
Community Narratives
