What has been the trend in AZY’s earnings?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. Over the last year AZY produced negative earnings of -AU$1.29M . But this is an improvement on prior year’s loss of -AU$1.92M, which may signal a turnaround since AZY has been loss-making for the past five years, on average, with an EPS of -AU$0.0067. As profits are moving up and up, CEO pay should mirror Mason’s hard work. During the same period, Mason’s total compensation grew by 34.62% to AU$616.81K. Furthermore, Mason’s pay is also made up of 3.89% non-cash elements, which means that variabilities in AZY’s share price can impact the actual level of what the CEO actually receives.
What’s a reasonable CEO compensation?
Despite the fact that no standard benchmark exists, as compensation should account for specific factors of the company and market, we can fashion a high-level yardstick to see if AZY is an outlier. This exercise helps investors ask the right question about Mason’s incentive alignment. Generally, an Australian small-cap is worth around $140M, generates earnings of $10M, and remunerates its CEO at roughly $500,000 per year. Usually I’d use market cap and profit as factors determining performance, however, AZY’s negative earnings reduces the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Mason’s pay is above other similar companies.
What this means for you:
Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in AZY, 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. 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 AZY’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 AZY? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!