Eugene Beukman is the CEO of Bard Ventures Ltd (TSXV:CBS), which has recently grown to a market capitalization of CA$1.51M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. 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 Beukman’s pay and compare this to the company’s performance over the same period, as well as measure it against other Canadian CEOs leading companies of similar size and profitability. View our latest analysis for Bard Ventures
Did Beukman create value?
Profitability of a company is a strong indication of CBS’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Beukman’s performance. Most recently, CBS produced negative earnings of -CA$160.11K . However, this is an improvement on prior year’s loss of -CA$182.92K, which may signal a turnaround since CBS has been loss-making for the past five years, on average, with an EPS of -CA$0.089. Given earnings are moving the right way, CEO pay should represent Beukman’s hard work. During the same period, Beukman’s total remuneration increased by a mere 0.46% to CA$68.75K. Moreover, Beukman’s pay is also comprised of non-cash items, which means that fluxes in CBS’s share price can affect the true level of what the CEO actually receives.
What’s a reasonable CEO compensation?
While there is no cookie-cutter approach, since compensation should be tailored to the specific company and market, we can fashion a high-level yardstick to see if CBS deviates substantially from its peers. This exercise can help shareholders ask the right question about Beukman’s incentive alignment. On average, a Canadian small-cap has a value of $345M, produces earnings of $24M, and remunerates its CEO circa $770,000 per annum. Normally I’d use market cap and profit as factors determining performance, however, CBS’s negative earnings reduces the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Beukman is paid aptly compared to those in similar-sized companies. Putting everything together, although CBS is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
My conclusion is that Beukman is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. 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 CBS’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 CBS? 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.