It's Unlikely That Mainstreet Equity Corp.'s (TSE:MEQ) CEO Will See A Huge Pay Rise This Year

Despite strong share price growth of 99% for Mainstreet Equity Corp. (TSE:MEQ) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 12 March 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Mainstreet Equity

How Does Total Compensation For Bob Dhillon Compare With Other Companies In The Industry?

Our data indicates that Mainstreet Equity Corp. has a market capitalization of CA$772m, and total annual CEO compensation was reported as CA$2.6m for the year to September 2020. That's a modest increase of 7.7% on the prior year. In particular, the salary of CA$1.40m, makes up a fairly large portion of the total compensation being paid to the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between CA$504m and CA$2.0b had a median total CEO compensation of CA$1.9m. This suggests that Bob Dhillon is paid more than the median for the industry. What's more, Bob Dhillon holds CA$348m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	CA$1.4m	CA$1.4m	54%
Other	CA$1.2m	CA$993k	46%
Total Compensation	CA$2.6m	CA$2.4m	100%

On an industry level, around 52% of total compensation represents salary and 48% is other remuneration. There isn't a significant difference between Mainstreet Equity and the broader market, in terms of salary allocation in the overall compensation package. 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.

A Look at Mainstreet Equity Corp.'s Growth Numbers

Over the last three years, Mainstreet Equity Corp. has shrunk its earnings per share by 18% per year. In the last year, its revenue is up 6.9%.

Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Mainstreet Equity Corp. Been A Good Investment?

Boasting a total shareholder return of 99% over three years, Mainstreet Equity Corp. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 3 warning signs (and 2 which are a bit concerning) in Mainstreet Equity we think you should know about.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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