What has AXSM’s performance been like?AXSM 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, AXSM released negative earnings of -US$28.94M , which is a further decline from prior year’s loss of -US$27.20M. Moreover, on average, AXSM has been loss-making in the past, with a 5-year average EPS of -US$1.06. During times of unprofitability the company may be incurring a period of reinvestment and growth, or it can be an indication of some headwind. Regardless, CEO compensation should echo the current condition of the business. In the latest report, Tabuteau’s total compensation more than doubled, reaching US$3.36M .
What’s a reasonable CEO compensation?
Despite the fact that no standard benchmark exists, as remuneration should be tailored to the specific company and market, we can gauge a high-level base line to see if AXSM deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Tabuteau’s incentive alignment. Normally, a US small-cap is worth around $1B, generates earnings of $96M, and remunerates its CEO circa $2.7M annually. Typically I would use earnings and market cap to account for variations in performance, however, AXSM’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Tabuteau’s pay exceeds its peer group.
What this means for you:
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Why is Tabuteau remuneration above that of similar companies? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. 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 AXSM’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 AXSM? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!