Why Goldbank Mining Corporation’s (CVE:GLB) CEO Salary Matters To You
James Boyce took the reins as CEO of Goldbank Mining Corporation’s (TSXV:GLB) and grew market cap to CADCA$11.35M 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. Today we will assess Boyce’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 Goldbank Mining
What has been the trend in GLB’s earnings?
Profitability of a company is a strong indication of GLB’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Boyce’s performance. Over the last year GLB released negative earnings of -CA$1.7M , which is a further decline from prior year’s loss of -CA$1.4M. Furthermore, on average, GLB has been loss-making in the past, with a 5-year average EPS of -CA$0.07. In the situation of negative earnings, the company may be going through a period of reinvestment and growth, or it can be an indication of some headwind. Regardless, CEO compensation should be reflective of the current condition of the business. In the most recent financial statments, Boyce’s total compensation rose by a mere 0.37% to CA$72,000. Furthermore, Boyce’s pay is also made up of 25.28% non-cash elements, which means that fluxes in GLB’s share price can affect the true level of what the CEO actually collects at the end of the year.
What’s a reasonable CEO compensation?
Even though one size does not fit all, as remuneration should be tailored to the specific company and market, we can estimate a high-level base line to see if GLB is an outlier. This outcome can help direct shareholders to ask the right question about Boyce’s incentive alignment. Generally, a Canadian small-cap is worth around $345M, generates earnings of $24M, and pays its CEO circa $770,000 annually. Usually I would use earnings and market cap to account for variations in performance, however, GLB’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Boyce is paid aptly compared to those in similar-sized companies. On the whole, though GLB is loss-making, it seems like the CEO’s pay is appropriate.
What this means for you:
Are you a shareholder? CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Boyce remunerated appropriately based on other factors we have not covered today? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. To find out more about GLB’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Whether Boyce is over or underpaid should not be a deciding factor whether or not you invest in GLB. However, the way the company is governed and policies, such as remuneration, are structured, are important considerations for an investor. The best place to start is to understand how well GLB is placed financially. To research more about these fundamentals, I recommend you check out our simple infographic report on GLB’s financial metrics.
PS. If you are not interested in Goldbank Mining anymore, you can use our free platform to see my list of over 50 sustainable companies producing great returns.
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.
