Does Gentor Resources Inc’s (CVE:GNT) CEO Salary Compared Well With Others?

Leading Gentor Resources Inc (TSXV:GNT) as the CEO, Arnold Kondrat took the company to a valuation of CA$1.97M. 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 Kondrat’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 Gentor Resources

What has been the trend in GNT’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. Most recently, GNT delivered negative earnings of -US$229.99K , which is a further decline from prior year’s loss of -US$221.86K. Additionally, on average, GNT has been loss-making in the past, with a 5-year average EPS of -US$0.29. During times of unprofitability the company may be incurring a period of reinvestment and growth, or it can be a sign of some headwind. In any event, CEO compensation should echo the current condition of the business. In the most recent financial statments, Kondrat’s total remuneration declined by a marginal -4.37%, to US$128.85K.
TSXV:GNT Income Statement Feb 26th 18
TSXV:GNT Income Statement Feb 26th 18

Is GNT’s CEO overpaid relative to the market?

Though one size does not fit all, as compensation should account for specific factors of the company and market, we can gauge a high-level base line to see if GNT is an outlier. This outcome helps investors ask the right question about Kondrat’s incentive alignment. On average, a Canadian small-cap has a value of $345M, generates earnings of $24M, and remunerates its CEO at roughly $770,000 per year. Typically I’d use market cap and profit as factors determining performance, however, GNT’s negative earnings lower the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Kondrat is being paid within the bounds of reasonableness. Putting everything together, even though GNT is unprofitable, it seems like the CEO’s pay is sound.

Next Steps:

My conclusion is that Kondrat is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. If you have not done so already, I urge you to complete your research by taking a look at the following: