Is Plumas Bancorp (PLBC) Overpaying Its CEO?
Andrew Ryback has been at the helm as CEO of Plumas Bancorp (NASDAQ:PLBC), which has grown to a market capitalization of USD$108.60M. 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. Today we will assess Ryback’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. Check out our latest analysis for Plumas Bancorp
What has been the trend in PLBC’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. Most recently, PLBC released an earnings of $9.2M , which is an increase of 30.58% from its last year’s earnings of $7.0M. This is an encouraging signal that PLBC aims to sustain a strong track record of generating profits regardless of the challenges. Since earnings are heading towards the right direction, CEO pay should echo Ryback’s hard work. In the same year, Ryback’s total compensation grew by 39.20% to $440,782.
What’s a reasonable CEO compensation?
While there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can determine a high-level yardstick to see if PLBC is an outlier. This exercise can help direct shareholders to ask the right question about Ryback’s incentive alignment. On average, a US small-cap has a value of $1B, generates earnings of $96M, and pays its CEO at roughly $2.7M per year. Accounting for PLBC’s size and performance, in terms of market cap and earnings, it appears that Ryback is compensated similar to other US CEOs of small-caps, on average. This could mean Ryback is paid a suitable level.
What this means for you:
Are you a shareholder? You can breathe easy knowing that shareholder funds aren’t being used to overpay PLBC’s CEO. However, on the flipside, you should ask whether Ryback 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. To find out more about PLBC’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? While CEO compensation is a good indication for how well-aligned the company leader is its investors, it is certainly not enough to simply base your investment decision on this metric. Regardless of whether Ryback’s pay is above or below peers, the more important factors to look at is PLBC’s track record of performance and future outlook moving forward. To research more about these fundamentals, I recommend you check out our simple infographic report on PLBC’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.
