Did Winfield create value?Profitability of a company is a strong indication of INTG’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Winfield’s performance. In the past year, INTG released negative earnings of -US$2.74M . However, this is an improvement on prior year’s loss of -US$3.83M, which may signal a turnaround since INTG has been loss-making for the past five years, on average, with an EPS of -US$0.64. As profits are moving up and up, CEO pay should represent Winfield’s valued-adding activities. Over the same period Winfield’s total remuneration dropped by more than half of the prior year’s level, to US$935.00K.
What’s a reasonable CEO compensation?
Even though there is no cookie-cutter approach, as remuneration should be tailored to the specific company and market, we can evaluate a high-level yardstick to see if INTG is an outlier. This outcome can help shareholders ask the right question about Winfield’s incentive alignment. Typically, a US small-cap has a value of $1B, generates earnings of $96M, and pays its CEO circa $2.7M per year. Normally I would look at market cap and earnings as a proxy for performance, however, INTG’s negative earnings reduces the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Winfield is remunerated sensibly relative to peers. Putting everything together, though INTG is unprofitable, it seems like the CEO’s pay is appropriate.
Hopefully this article has given you insight on how shareholders should think about INTG’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 highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about INTG’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 INTG? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!