Roger Lemaitre is the CEO of UEX Corporation (TSE:UEX), which has recently grown to a market capitalization of CA$67.85m. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. I will break down Lemaitre’s pay and compare this to the company’s performance over the same period, as well as measure it against other Canadian CEOs leading companies of similar size and profitability.
Did Lemaitre create value?Earnings is a powerful indication of UEX’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Lemaitre’s performance in the past year. Recently, UEX produced negative earnings of -CA$6.45m . But this is an improvement on prior year’s loss of -CA$6.55m, which may signal a turnaround since UEX has been loss-making for the past five years, on average, with an EPS of -CA$0.023. Given earnings are moving the right way, CEO pay should echo Lemaitre’s hard work. During this period Lemaitre’s total compensation rose by 6.94% to CA$378.27k. Moreover, Lemaitre’s pay is also made up of 21.75% non-cash elements, which means that fluctuations in UEX’s share price can impact the actual level of what the CEO actually takes home at the end of the day.
Is UEX’s CEO overpaid relative to the market?Despite the fact that there is no cookie-cutter approach, since remuneration should be tailored to the specific company and market, we can gauge a high-level benchmark to see if UEX is an outlier. This exercise helps investors ask the right question about Lemaitre’s incentive alignment. Normally, a Canadian small-cap has a value of $345M, produces earnings of $24M, and remunerates its CEO at roughly $770,000 per annum. Typically I’d use market cap and profit as factors determining performance, however, UEX’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Lemaitre is paid aptly compared to those in similar-sized companies. Overall, even though UEX is loss-making, it seems like the CEO’s pay is appropriate.
Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in UEX, 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 urge you to complete your research by taking a look at the following:
- Governance: To find out more about UEX’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 UEX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.