Kevin Rountree is the CEO of Games Workshop Group PLC (LON:GAW), which has recently grown to a market capitalization of UK£1.07b. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Rountree’s pay and compare this to the company’s performance over the same period, as well as measure it against other UK CEOs leading companies of similar size and profitability.
What has been the trend in GAW’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. In the past year, GAW produced an earnings of UK£59.68m , which is an increase of 91.10% from its prior year’s earnings of UK£31.23m. This is a positive indication that GAW has strived to maintain a good track record of profitability in the face of any headwinds. As profits are moving up and up, CEO pay should be reflective of Rountree’s hard work. During this period Rountree’s total remuneration declined by a trivial -0.20%, to UK£401.00k.
Is GAW overpaying the CEO?Though no standard benchmark exists, as remuneration should account for specific factors of the company and market, we can determine a high-level benchmark to see if GAW is an outlier. This exercise helps investors ask the right question about Rountree’s incentive alignment. Normally, a UK small-cap is worth around £696M, generates earnings of £67M, and remunerates its CEO circa £1M per annum. Accounting for GAW’s size and performance, in terms of market cap and earnings, it seems that Rountree is paid lower than other similar UK CEOs in the small-cap industry.
Hopefully this article has given you insight on how shareholders should think about GAW’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about GAW’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GAW? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.