Leading New Talisman Gold Mines Limited (NZSE:NTL) as the CEO, Matt Hill took the company to a valuation of NZ$32.47M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Hill’s pay and compare this to the company’s performance over the same period, as well as measure it against other New Zealand CEOs leading companies of similar size and profitability. Check out our latest analysis for New Talisman Gold Mines
What has been the trend in NTL’s earnings?
NTL 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, NTL produced negative earnings of -NZ$1.01M , which is a further decline from prior year’s loss of -NZ$701.36K. Furthermore, on average, NTL has been loss-making in the past, with a 5-year average EPS of -NZ$0.0019. In the situation of unprofitability the company may be facing a period of reinvestment and growth, or it can be an indication of some headwind. In any event, CEO compensation should mirror the current state of the business. In the latest financial report, Hill’s total compensation declined by a meaningful rate of -34.78%, to NZ$0. Although I couldn’t find information on the breakdown of Hill’s pay, if some portion were non-cash items such as stocks and options, then fluctuations in NTL’s share price can move the actual level of what the CEO actually receives.
What’s a reasonable CEO compensation?
Though one size does not fit all, since remuneration should be tailored to the specific company and market, we can gauge a high-level yardstick to see if NTL is an outlier. This exercise can help shareholders ask the right question about Hill’s incentive alignment. Typically, a NZ small-cap has a value of $190M, creates earnings of $18M, and remunerates its CEO circa $480,000 per annum. Typically I’d use market cap and profit as factors determining performance, however, NTL’s negative earnings reduces the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Hill is remunerated sensibly relative to peers. On the whole, though NTL is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Hill remunerated appropriately based on other factors we have not covered today? 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 NTL’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 NTL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.