What has BGLOBAL’s performance been like?BGLOBAL can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. In the past year, BGLOBAL released negative earnings of -₹8.00M , compared to the previous year’s positive earnings. Moreover, BGLOBAL hasn’t always been loss-making, with an average EPS of ₹1.33 over the past five years. During times of unprofitability the company may be going through a period of reinvestment and growth, or it can be a signal of some headwind. In any case, CEO compensation should echo the current condition of the business. In the latest report, Bhhatia’s total compensation rose by 46.67% to ₹2.20M. Although I couldn’t find information on the composition of Bhhatia’s pay, if some portion were non-cash items such as stocks and options, then fluctuations in BGLOBAL’s share price can impact the actual level of what the CEO actually receives.
Is BGLOBAL overpaying the CEO?
Though there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can determine a high-level thresold to see if BGLOBAL deviates substantially from its peers. This exercise helps investors ask the right question about Bhhatia’s incentive alignment. On average, a BSE or NSEI small-cap has a value of ₹9.88 Arab, generates earnings of ₹43 Crore, and pays its CEO at roughly ₹73 Lakh annually. Typically I would look at market cap and earnings as a proxy for performance, however, BGLOBAL’s negative earnings reduces the usefulness of my formula. Looking at the range of compensation for small-cap executives, it seems like Bhhatia is paid aptly compared to those in similar-sized companies. On the whole, though BGLOBAL is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
You can breathe easy knowing that shareholder funds aren’t being used to overpay BGLOBAL’s CEO. However, on the flipside, you should ask whether Bhhatia is appropriately remunerated on the basis of retention. Its important for shareholders to be active in voting governance decisions, as board members are only representatives of investors’ voices. 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 BGLOBAL’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 BGLOBAL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!