Is Colombia Crest Gold Corp (CVE:CLB) Excessively Paying Its CEO?

Walter Lienhard took the helm as Colombia Crest Gold Corp’s (TSXV:CLB) CEO and grew market cap to CA$1.92M recently. 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 Lienhard’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. Check out our latest analysis for Colombia Crest Gold

What has CLB’s performance been like?

Profitability of a company is a strong indication of CLB’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Lienhard’s performance. Most recently, CLB released a profit of CA$582.57K , moving CLB from negative territory of -CA$158.78K in the prior year to profitability. This could signal a turnaround given that CLB has been loss-making for the past five years, on average, with an EPS of -CA$0.075. Given earnings are moving the right way, CEO pay should mirror Lienhard’s hard work. During this period Lienhard’s total compensation fell by a meaningful rate of -34.23%, to CA$15.11K. Although I couldn’t find information on the breakdown of Lienhard’s pay, if some portion were non-cash items such as stocks and options, then fluxes in CLB’s share price can affect the true level of what the CEO actually receives.
TSXV:CLB Past Future Earnings Apr 10th 18
TSXV:CLB Past Future Earnings Apr 10th 18

Is CLB’s CEO overpaid relative to the market?

Even though there is no cookie-cutter approach, since remuneration should be tailored to the specific company and market, we can evaluate a high-level base line to see if CLB deviates substantially from its peers. This outcome can help shareholders ask the right question about Lienhard’s incentive alignment. On average, a Canadian small-cap is worth around $345M, creates earnings of $24M, and pays its CEO circa $770,000 per annum. Taking into account CLB’s size and performance, in terms of market cap and earnings, it seems that Lienhard is paid in-line with the average Canadian small-cap CEO This indicates that Lienhard’s pay is fair.

Next Steps:

In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Lienhard’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Governance: To find out more about CLB’s governance, look through our infographic report of the company’s board and management.
  2. 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.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CLB? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!