Does Eiger BioPharmaceuticals Inc’s (NASDAQ:EIGR) CEO Pay Reflect Performance?

David Cory took the helm as Eiger BioPharmaceuticals Inc’s (NASDAQ:EIGR) CEO and grew market cap to US$115.41M recently. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. I will break down Cory’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. View our latest analysis for Eiger BioPharmaceuticals

What has EIGR’s performance been like?

Earnings is a powerful indication of EIGR’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Cory’s performance in the past year. Most recently, EIGR produced negative earnings of -US$40.04M . However, this is an improvement on prior year’s loss of -US$48.58M, which may signal a turnaround since EIGR has been loss-making for the past five years, on average, with an EPS of -US$17.46. As profits are moving up and up, CEO pay should mirror Cory’s hard work. During this period Cory’s total remuneration more than doubled, reaching US$3.66M .
NasdaqGM:EIGR Past Future Earnings May 17th 18
NasdaqGM:EIGR Past Future Earnings May 17th 18

What’s a reasonable CEO compensation?

Despite the fact that no standard benchmark exists, as remuneration should account for specific factors of the company and market, we can gauge a high-level base line to see if EIGR deviates substantially from its peers. This outcome can help shareholders ask the right question about Cory’s incentive alignment. Generally, a US small-cap has a value of $1B, generates earnings of $96M, and remunerates its CEO at roughly $2.7M per annum. Usually I would look at market cap and earnings as a proxy for performance, however, EIGR’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Cory’s pay is above other similar companies.

What this means for you:

Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in EIGR, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Governance: To find out more about EIGR’s governance, look through our infographic report of the company’s board and management.
  2. 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.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of EIGR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!