Should Shareholders Reconsider Emergia Inc.'s (CSE:EMER) CEO Compensation Package?

Shareholders will probably not be too impressed with the underwhelming results at Emergia Inc. (CSE:EMER) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28 June 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Emergia

Comparing Emergia Inc.'s CEO Compensation With the industry

According to our data, Emergia Inc. has a market capitalization of CA$28m, and paid its CEO total annual compensation worth CA$300k over the year to December 2020. This was the same amount the CEO received in the prior year. Notably, the salary of CA$300k is the entirety of the CEO compensation.

In comparison with other companies in the industry with market capitalizations under CA$247m, the reported median total CEO compensation was CA$260k. From this we gather that Henri Petit is paid around the median for CEOs in the industry. Moreover, Henri Petit also holds CA$4.9m worth of Emergia 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$300k	CA$300k	100%
Other	-	-	-
Total Compensation	CA$300k	CA$300k	100%

Talking in terms of the industry, salary represented approximately 56% of total compensation out of all the companies we analyzed, while other remuneration made up 44% of the pie. On a company level, Emergia prefers to reward its CEO through a salary, opting not to pay Henri Petit through non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Emergia Inc.'s Growth

Over the last three years, Emergia Inc. has shrunk its earnings per share by 4.0% per year. It saw its revenue drop 29% over the last year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Emergia Inc. Been A Good Investment?

With a total shareholder return of -82% over three years, Emergia Inc. shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Emergia pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 6 warning signs for Emergia (3 are significant!) that you should be aware of before investing here.

Important note: Emergia 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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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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