Yves Leduc has been the CEO of Velan Inc. (TSE:VLN) since 2017, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Velan.
Check out our latest analysis for Velan
Comparing Velan Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Velan Inc. has a market capitalization of CA$141m, and reported total annual CEO compensation of CA$553k for the year to February 2020. That's mostly flat as compared to the prior year's compensation. In particular, the salary of US$436.0k, makes up a huge portion of the total compensation being paid to the CEO.
For comparison, other companies in the industry with market capitalizations below CA$254m, reported a median total CEO compensation of CA$318k. Hence, we can conclude that Yves Leduc is remunerated higher than the industry median. What's more, Yves Leduc holds CA$261k worth of shares in the company in their own name.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | CA$436k | CA$443k | 79% |
| Other | CA$117k | CA$108k | 21% |
| Total Compensation | CA$553k | CA$551k | 100% |
Speaking on an industry level, nearly 60% of total compensation represents salary, while the remainder of 40% is other remuneration. It's interesting to note that Velan pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at Velan Inc.'s Growth Numbers
Over the last three years, Velan Inc. has shrunk its earnings per share by 8.8% per year. In the last year, its revenue is down 5.3%.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Velan Inc. Been A Good Investment?
Given the total shareholder loss of 62% over three years, many shareholders in Velan Inc. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
To Conclude...
As we noted earlier, Velan pays its CEO higher than the norm for similar-sized companies belonging to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. Add to that declining EPS growth, and you have the perfect recipe for shareholder irritation. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for Velan that investors should look into moving forward.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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This article by Simply Wall St is general in nature. 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. Simply Wall St has no position in any stocks mentioned.
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About TSX:VLN
Flawless balance sheet and good value.
