Leading United States Antimony Corporation (AMEX:UAMY) as the CEO, John Lawrence took the company to a valuation of $20.92M. 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 Lawrence’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 United States Antimony
What has UAMY performance been like?
UAMY 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. Recently, UAMY delivered negative earnings of -$0.9M . But this is an improvement on prior year’s loss of -$2.1M, which may signal a turnaround since UAMY has been loss-making for the past five years, on average, with an EPS of -$0.01. Since earnings are heading towards the right direction, CEO pay should be reflective of Lawrence’s valued-adding activities. In the same year, Lawrence’s total compensation remained stable at $216,000 since the previous year. Moreover, Lawrence’s pay is also made up of 6.26% non-cash elements, which means that fluctuations in UAMY’s share price can move the real level of what the CEO actually takes home at the end of the day.
What’s a reasonable CEO compensation?
Though no standard benchmark exists, as compensation should account for specific factors of the company and market, we can estimate a high-level base line to see if UAMY deviates substantially from its peers. This outcome can help shareholders ask the right question about Lawrence’s incentive alignment. Typically, a US small-cap has a value of $1B, creates earnings of $96M, and remunerates its CEO circa $2.7M annually. Usually I would look at market cap and earnings as a proxy for performance, however, UAMY’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Lawrence is paid aptly compared to those in similar-sized companies. Putting everything together, though UAMY is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
What this means for you:
Are you a shareholder? You can breathe easy knowing that shareholder funds aren’t being used to overpay UAMY’s CEO. However, on the flipside, you should ask whether Lawrence 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. To find out more about UAMY’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Whether Lawrence is over or underpaid should not be a deciding factor whether or not you invest in UAMY. However, the way the company is governed and policies, such as remuneration, are structured, are important considerations for an investor. The best place to start is to understand how well UAMY is placed financially. To research more about these fundamentals, I recommend you check out our simple infographic report on UAMY’s financial metrics.
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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.