Steve Shindler is the CEO of NII Holdings Inc (NASDAQ:NIHD), which has recently grown to a market capitalization of $67.10M. 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 Shindler’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. See our latest analysis for NII Holdings
Did Shindler create value?
Earnings is a powerful indication of NIHD’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Shindler’s performance in the past year. In the past year, NIHD delivered negative earnings of -$332.0M , compared to the previous year’s positive earnings. Though, on average, NIHD has been loss-making in the past, with a 5-year average EPS of -$3.29. 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. Regardless, CEO compensation should be reflective of the current condition of the business. From the latest report, Shindler’s total compensation declined by more than half of the prior year’s level, to $3,556,899. In addition to this, Shindler’s pay is also made up of 3.23% non-cash elements, which means that fluctuations in NIHD’s share price can impact the real level of what the CEO actually receives.
Is NIHD’s CEO overpaid relative to the market?
Even though one size does not fit all, since compensation should be tailored to the specific company and market, we can estimate a high-level benchmark to see if NIHD deviates substantially from its peers. This outcome can help shareholders ask the right question about Shindler’s incentive alignment. On average, a US small-cap has a value of $1B, creates earnings of $96M, and pays its CEO circa $2.7M per annum. Normally I’d use market cap and profit as factors determining performance, however, NIHD’s negative earnings reduces the usefulness of my formula. Looking at the range of compensation for small-cap executives, it seems like Shindler’s pay is above other similar companies.
What this means for you:
Whether Shindler is over or underpaid should not be a deciding factor whether or not you invest in NIHD. 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 NIHD is placed financially. If you have not done so already, I urge you to complete your research by taking a look at the following:
- 1. Governance: To find out more about WOW’s governance, look through our infographic report of the company’s board and management.
- 2. 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.
- 3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NIHD? 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.