How Much Did Hawaiian Telcom Holdco Inc’s (NASDAQ:HCOM) CEO Pocket Last Year?
Leading Hawaiian Telcom Holdco Inc (NASDAQ:HCOM) as the CEO, Scott Barber took the company to a valuation of US$327.71M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. 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 Barber’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 Hawaiian Telcom Holdco
What has been the trend in HCOM’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. Over the last year HCOM released negative earnings of -US$107.24M , compared to the previous year’s positive earnings. Additionally, HCOM hasn’t always been loss-making, with an average EPS of US$3.87 over the past five years. During times of negative earnings, the company may be going through a period of reinvestment and growth, or it can be a signal of some headwind. In any case, CEO compensation should mirror the current condition of the business. From the latest report, Barber’s total compensation declined by a trivial -2.35%, to US$1.36M.
Is HCOM’s CEO overpaid relative to the market?
Despite the fact that there is no cookie-cutter approach, since compensation should account for specific factors of the company and market, we can gauge a high-level benchmark to see if HCOM deviates substantially from its peers. This exercise can help shareholders ask the right question about Barber’s incentive alignment. Generally, a US small-cap has a value of $1B, creates earnings of $96M, and remunerates its CEO at roughly $2.7M annually. Normally I’d use market cap and profit as factors determining performance, however, HCOM’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Barber is paid aptly compared to those in similar-sized companies. On the whole, though HCOM is loss-making, it seems like the CEO’s pay is sound.
Next Steps:
Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in HCOM, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. 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 HCOM’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 HCOM? 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.
