Does Wilhelmina International Inc’s (WHLM) CEO Pay Reflect Performance?
Bill Wackermann took the reins as CEO of Wilhelmina International Inc’s (NASDAQ:WHLM) and grew market cap to USD$34.44M recently. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. 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 Wackermann’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 Wilhelmina International
What has WHLM performance been like?
Earnings is a powerful indication of WHLM’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Wackermann’s performance in the past year. In the past year, WHLM delivered negative earnings of -$0.6M , compared to the previous year’s positive earnings. Additionally, WHLM hasn’t always been loss-making, with an average EPS of $0.22 over the past five years. During times of negative earnings, 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 represent the current condition of the business. In the most recent financial statments, Wackermann’s total compensation more than doubled, to $1,197,950 .
Is WHLM overpaying the CEO?
While one size does not fit all, since remuneration should account for specific factors of the company and market, we can gauge a high-level benchmark to see if WHLM is an outlier. This exercise can help shareholders ask the right question about Wackermann’s incentive alignment. On average, a US small-cap is worth around $1B, generates earnings of $96M, and remunerates its CEO circa $2.7M per annum. Typically I would use earnings and market cap to account for variations in performance, however, WHLM’s negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Wackermann is paid aptly compared to those in similar-sized companies. Overall, although WHLM is loss-making, it seems like the CEO’s pay is fair.
What this means for you:
Are you a shareholder? In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Wackermann’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. To find out more about WHLM’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Whether Wackermann is over or underpaid should not be a deciding factor whether or not you invest in WHLM. 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 WHLM is placed financially. To research more about these fundamentals, I recommend you check out our simple infographic report on WHLM’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.
