How Much Did Ross River Minerals Inc’s (TSXV:RRMH) CEO Pocket Last Year?
Marcus Foster took the reins as CEO of Ross River Minerals Inc’s (TSXV:RRM.H) and grew market cap to CADCA$375.10K recently. 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. Today we will assess Foster’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. Check out our latest analysis for Ross River Minerals
What has RRM.H performance been like?
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, RRM.H released negative earnings of -CA$0M , which is a further decline from prior year’s loss of -CA$0M. Additionally, on average, RRM.H has been loss-making in the past, with a 5-year average EPS of -CA$0.02. In the situation of negative earnings, the company may be facing a period of reinvestment and growth, or it can be a sign of some headwind. In any event, CEO compensation should represent the current condition of the business. In the latest report, Foster’s total remuneration increased by 14.89% to CA$27,000. Moreover, Foster’s pay is also made up of 36.78% non-cash elements, which means that fluctuations in RRM.H’s share price can move the actual level of what the CEO actually collects at the end of the year.
Is RRM.H’s CEO overpaid relative to the market?
Despite the fact that no standard benchmark exists, since compensation should be tailored to the specific company and market, we can fashion a high-level yardstick to see if RRM.H is an outlier. This exercise can help direct shareholders to ask the right question about Foster’s incentive alignment. On average, a Canadian small-cap has a value of $345M, creates earnings of $24M, and remunerates its CEO circa $770,000 annually. Typically I would use earnings and market cap to account for variations in performance, however, RRM.H’s negative earnings lower the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Foster is paid aptly compared to those in similar-sized companies. Putting everything together, although RRM.H 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 Foster’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 RRM.H’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in RRM.H, 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. To research more about these fundamentals, I recommend you check out our simple infographic report on RRM.H’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.
