Is Manado Gold Corp’s (CVE:MDO) CEO Incentives Align With Yours?
Logan Anderson took the helm as Manado Gold Corp’s (TSXV:MDO) CEO and grew market cap to CA$704.91K 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 Anderson’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. See our latest analysis for Manado Gold
What has been the trend in MDO’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. Recently, MDO delivered negative earnings of -CA$450.02K . However, this is an improvement on prior year’s loss of -CA$641.67K, which may signal a turnaround since MDO has been loss-making for the past five years, on average, with an EPS of -CA$0.16. Since earnings are heading towards the right direction, CEO pay should mirror Anderson’s hard work. In the same year, Anderson’s total compensation remained stable at CA$72.00K since the previous year.
What’s a reasonable CEO compensation?
While there is no cookie-cutter approach, since remuneration should account for specific factors of the company and market, we can determine a high-level yardstick to see if MDO is an outlier. This outcome can help shareholders ask the right question about Anderson’s incentive alignment. Normally, a Canadian small-cap is worth around $345M, generates earnings of $24M, and pays its CEO circa $770,000 per annum. Usually I’d use market cap and profit as factors determining performance, however, MDO’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Anderson is paid aptly compared to those in similar-sized companies. Putting everything together, although MDO is unprofitable, 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 MDO’s CEO. However, on the flipside, you should ask whether Anderson 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:
Governance: To find out more about MDO’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 MDO? 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.
