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Does Unico American Corporation’s (NASDAQ:UNAM) CEO Pay Reflect Performance?

Cary Cheldin took the helm as Unico American Corporation’s (NASDAQ:UNAM) CEO and grew market cap to US$42.72M 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 Cheldin’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. Check out our latest analysis for Unico American

Did Cheldin create value?

Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Most recently, UNAM delivered negative earnings of -US$5.35M , which is a further decline from prior year’s loss of -US$2.25M. Though, UNAM hasn’t always been loss-making, with an average EPS of US$0.076 over the past five years. During times of negative earnings, the company may be incurring a period of reinvestment and growth, or it can be a sign of some headwind. In any case, CEO compensation should represent the current state of the business. In the latest report, Cheldin’s total compensation rose by a mere 2.10% to US$411.43K. Although I couldn’t find information on the composition of Cheldin’s pay, if some portion were non-cash items such as stocks and options, then fluxes in UNAM’s share price can impact the true level of what the CEO actually receives.

NasdaqGM:UNAM Income Statement Feb 28th 18
NasdaqGM:UNAM Income Statement Feb 28th 18

Is UNAM’s CEO overpaid relative to the market?

Even though there is no cookie-cutter approach, as compensation should account for specific factors of the company and market, we can evaluate a high-level benchmark to see if UNAM deviates substantially from its peers. This exercise can help direct shareholders to ask the right question about Cheldin’s incentive alignment. Typically, a US small-cap is worth around $1B, creates earnings of $96M, and pays its CEO circa $2.7M per year. Typically I would use earnings and market cap to account for variations in performance, however, UNAM’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Cheldin is paid aptly compared to those in similar-sized companies. Putting everything together, although UNAM is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.

Next Steps:

You can breathe easy knowing that shareholder funds aren’t being used to overpay UNAM’s CEO. However, on the flipside, you should ask whether Cheldin 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. 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 UNAM’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 UNAM? 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.

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