Shareholders May Not Be So Generous With Knight Therapeutics Inc.'s (TSE:GUD) CEO Compensation And Here's Why

Shareholders of Knight Therapeutics Inc. (TSE:GUD) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 13 May 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Knight Therapeutics

Comparing Knight Therapeutics Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Knight Therapeutics Inc. has a market capitalization of CA$668m, and reported total annual CEO compensation of CA$856k for the year to December 2020. We note that's a decrease of 24% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$319k.

For comparison, other companies in the same industry with market capitalizations ranging between CA$244m and CA$976m had a median total CEO compensation of CA$763k. From this we gather that Jonathan Goodman is paid around the median for CEOs in the industry. Moreover, Jonathan Goodman also holds CA$117m worth of Knight Therapeutics 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$319k	CA$310k	37%
Other	CA$537k	CA$816k	63%
Total Compensation	CA$856k	CA$1.1m	100%

Talking in terms of the industry, salary represented approximately 67% of total compensation out of all the companies we analyzed, while other remuneration made up 33% of the pie. It's interesting to note that Knight Therapeutics allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Knight Therapeutics Inc.'s Growth Numbers

Knight Therapeutics Inc.'s earnings per share (EPS) grew 38% per year over the last three years. Its revenue is up 316% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Knight Therapeutics Inc. Been A Good Investment?

Few Knight Therapeutics Inc. shareholders would feel satisfied with the return of -33% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Knight Therapeutics (1 doesn't sit too well with us!) that you should be aware of before investing here.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. 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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