Leading OptimumBank Holdings Inc (NASDAQ:OPHC) as the CEO, Tim Terry took the company to a valuation of US$7.31M. 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 Terry’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 OptimumBank Holdings
What has OPHC’s performance been like?
OPHC can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Recently, OPHC released negative earnings of -US$591.00K , which is a further decline from prior year’s loss of -US$403.00K. Moreover, on average, OPHC has been loss-making in the past, with a 5-year average EPS of -US$24.26. During times of unprofitability the company may be facing a period of reinvestment and growth, or it can be a signal of some headwind. In any event, CEO compensation should echo the current condition of the business. From the latest financial statments, Terry’s total compensation remained stable at US$233.40K since the previous year. Although I couldn’t find information on the composition of Terry’s pay, if some portion were non-cash items such as stocks and options, then fluxes in OPHC’s share price can impact the real level of what the CEO actually takes home at the end of the day.
Is OPHC overpaying the CEO?
Though no standard benchmark exists, as remuneration should be tailored to the specific company and market, we can fashion a high-level benchmark to see if OPHC is an outlier. This outcome helps investors ask the right question about Terry’s incentive alignment. Typically, a US small-cap is worth around $1B, generates earnings of $96M, and remunerates its CEO circa $2.7M per year. Typically I would look at market cap and earnings as a proxy for performance, however, OPHC’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Terry is remunerated sensibly relative to peers. On the whole, even though OPHC is unprofitable, it seems like the CEO’s pay is sound.
Hopefully this article has given you insight on how shareholders should think about OPHC’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about OPHC’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 OPHC? 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.