Here's Why Shareholders May Want To Be Cautious With Increasing Jackpot Digital Inc.'s (CVE:JJ) CEO Pay Packet

In the past three years, the share price of Jackpot Digital Inc. (CVE:JJ) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 16 September 2021. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Jackpot Digital

How Does Total Compensation For Jake Kalpakian Compare With Other Companies In The Industry?

According to our data, Jackpot Digital Inc. has a market capitalization of CA$17m, and paid its CEO total annual compensation worth CA$409k over the year to December 2020. Notably, that's an increase of 79% over the year before. Notably, the salary which is CA$396.0k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below CA$253m, we found that the median total CEO compensation was CA$288k. Hence, we can conclude that Jake Kalpakian is remunerated higher than the industry median.

Component	2020	2019	Proportion (2020)
Salary	CA$396k	CA$198k	97%
Other	CA$13k	CA$31k	3%
Total Compensation	CA$409k	CA$229k	100%

Speaking on an industry level, nearly 86% of total compensation represents salary, while the remainder of 14% is other remuneration. Jackpot Digital has gone down a largely traditional route, paying Jake Kalpakian a high salary, giving it preference over non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Jackpot Digital Inc.'s Growth

Over the past three years, Jackpot Digital Inc. has seen its earnings per share (EPS) grow by 90% per year. Its revenue is down 81% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Jackpot Digital Inc. Been A Good Investment?

With a total shareholder return of -90% over three years, Jackpot Digital Inc. shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Jake receives almost all of their compensation through a salary. Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 6 warning signs for Jackpot Digital (of which 4 are a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Jackpot Digital, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.
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