Brendan Hoffman is the CEO of Vince Holding Corp (NYSE:VNCE), which has recently grown to a market capitalization of US$98.27M. 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. I will break down Hoffman’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. See our latest analysis for Vince Holding
What has been the trend in VNCE’s earnings?
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. In the past year, VNCE delivered negative earnings of -US$178.06M , compared to the previous year’s positive earnings. However, on average, VNCE has been loss-making in the past, with a 5-year average EPS of -US$4.27. During times of negative earnings, the company may be going through a period of reinvestment and growth, or it can be a sign of some headwind. Regardless, CEO compensation should echo the current state of the business. From the latest financial report, Hoffman’s total remuneration dropped by -12.45%, to US$909.92K. Furthermore, Hoffman’s pay is also made up of 2.06% non-cash elements, which means that fluctuations in VNCE’s share price can impact the true level of what the CEO actually takes home at the end of the day.
Is VNCE overpaying the CEO?
Despite the fact that no standard benchmark exists, as remuneration should account for specific factors of the company and market, we can estimate a high-level thresold to see if VNCE is an outlier. This outcome can help shareholders ask the right question about Hoffman’s incentive alignment. Normally, a US small-cap is worth around $1B, creates earnings of $96M, and pays its CEO circa $2.7M per year. Typically I would look at market cap and earnings as a proxy for performance, however, VNCE’s negative earnings lower the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Hoffman is being paid within the bounds of reasonableness. Putting everything together, even though VNCE is loss-making, it seems like the CEO’s pay is sound.
You can breathe easy knowing that shareholder funds aren’t being used to overpay VNCE’s CEO. However, on the flipside, you should ask whether Hoffman 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 urge you to complete your research by taking a look at the following:
- Governance: To find out more about VNCE’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 VNCE? 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.