What has CHCI’s performance been like?CHCI 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, CHCI released negative earnings of -US$5.24M . However, this is an improvement on prior year’s loss of -US$6.66M, which may signal a turnaround since CHCI has been loss-making for the past five years, on average, with an EPS of -US$1.62. Given earnings are moving the right way, CEO pay should echo Clemente’s value creation for shareholders. During the same period, Clemente’s total remuneration dropped by a non-trivial rate of -31.15%, to US$400.00K. In addition to this, Clemente’s pay is also made up of non-cash elements, which means that variabilities in CHCI’s share price can move the true level of what the CEO actually receives.
What’s a reasonable CEO compensation?
Even though there is no cookie-cutter approach, since compensation should be tailored to the specific company and market, we can fashion a high-level benchmark to see if CHCI is an outlier. This outcome can help shareholders ask the right question about Clemente’s incentive alignment. Typically, a US small-cap is worth around $1B, creates earnings of $96M, and pays its CEO circa $2.7M annually. Usually I’d use market cap and profit as factors determining performance, however, CHCI’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Clemente is remunerated sensibly relative to peers. On the whole, although CHCI is unprofitable, it seems like the CEO’s pay is reflective of the appropriate level.
Hopefully this article has given you insight on how shareholders should think about CHCI’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 CHCI’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 CHCI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!