Did Quay create value?ATOS 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. Recently, ATOS delivered negative earnings of -$11.2M , which is a further decline from prior year’s loss of -$6.4M. Furthermore, on average, ATOS has been loss-making in the past, with a 5-year average EPS of -$5.99. During times of unprofitability the company may be incurring a period of reinvestment and growth, or it can be an indication of some headwind. In any event, CEO compensation should echo the current state of the business. In the latest report, Quay’s total compensation fell by -14.22%, to $1,008,552. Although I couldn’t find information on the composition of Quay’s pay, if some portion were non-cash items such as stocks and options, then variabilities in ATOS’s share price can move the real level of what the CEO actually takes home at the end of the day.
Is ATOS overpaying the CEO?
Despite the fact that no standard benchmark exists, since remuneration should account for specific factors of the company and market, we can fashion a high-level benchmark to see if ATOS deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Quay’s incentive alignment. Normally, a US small-cap is worth around $1B, creates earnings of $96M, and remunerates its CEO at roughly $2.7M per year. Normally I would use earnings and market cap to account for variations in performance, however, ATOS’s negative earnings reduces the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Quay is paid aptly compared to those in similar-sized companies. Putting everything together, even though ATOS is loss-making, it seems like the CEO’s pay is sound.
What this means for you:
Are you a shareholder? You can breathe easy knowing that shareholder funds aren’t being used to overpay ATOS’s CEO. However, on the flipside, you should ask whether Quay 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. To find out more about ATOS’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Although remuneration can be a useful gauge of whether Quay’s incentives are well-aligned with ATOS’s shareholders, it is certainly not sufficient to base your investment decision solely on this factor. Whether the company is fundamentally strong depends on ATOS’s financial health and its future outlook. To research more about these fundamentals, I recommend you check out our simple infographic report on ATOS’s financial metrics.PS. If you are not interested in Atossa Genetics anymore, you can use our free platform to see my list of over 50 sustainable companies producing great returns.