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

Under the guidance of CEO Geoff Rotstein, EQ Inc. (CVE:EQ) has performed reasonably well recently. This is something shareholders will keep in mind as they cast their votes on company resolutions such as executive remuneration in the upcoming AGM on 27 May 2021. However, some shareholders may still be hesitant of being overly generous with CEO compensation.

View our latest analysis for EQ

How Does Total Compensation For Geoff Rotstein Compare With Other Companies In The Industry?

At the time of writing, our data shows that EQ Inc. has a market capitalization of CA$99m, and reported total annual CEO compensation of CA$391k for the year to December 2020. We note that's an increase of 42% above last year. In particular, the salary of CA$275.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below CA$241m, we found that the median total CEO compensation was CA$165k. This suggests that Geoff Rotstein is paid more than the median for the industry. Moreover, Geoff Rotstein also holds CA$5.4m worth of EQ stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	CA$275k	CA$275k	70%
Other	CA$116k	CA$910	30%
Total Compensation	CA$391k	CA$276k	100%

On an industry level, roughly 93% of total compensation represents salary and 7% is other remuneration. EQ sets aside a smaller share of compensation for salary, in comparison to the overall 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 EQ Inc.'s Growth Numbers

Over the last three years, EQ Inc. has shrunk its earnings per share by 2.3% per year. It achieved revenue growth of 16% over the last year.

The reduction in EPS, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has EQ Inc. Been A Good Investment?

Most shareholders would probably be pleased with EQ Inc. for providing a total return of 114% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

The overall company performance has been commendable, however there are still areas for improvement. EPS growth is still weak, and until that picks up, shareholders may find it hard to approve a pay rise for the CEO, since they are already paid above the average in their industry.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 4 warning signs (and 1 which is concerning) in EQ we think you should know about.

Important note: EQ is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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