William White is the CEO of Coastway Bancorp Inc (NASDAQ:CWAY), which has recently grown to a market capitalization of $96.63M. 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 White’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. View our latest analysis for Coastway Bancorp
Did White create value?
Earnings is a powerful indication of CWAY’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of White’s performance in the past year. Most recently, CWAY released a profit of $3.1M compared to its prior year’s earnings of $3.4M – a decline of -8.60%. However, CWAY has strived to sustain a strong track record of generating profits, given its average EPS of $0.31 over the past couple of years. In the situation of deteriorating profitability, the company may be incurring a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should be reflective of the current condition of the business. From the latest report, White’s total remuneration increased by 48.11% to $760,866. Although I couldn’t find information on the breakdown of White’s pay, if some portion were non-cash items such as stocks and options, then fluxes in CWAY’s share price can move the actual level of what the CEO actually receives.
Is CWAY overpaying the CEO?
Despite the fact that no standard benchmark exists, since compensation should account for specific factors of the company and market, we can evaluate a high-level thresold to see if CWAY deviates substantially from its peers. This exercise can help direct shareholders to ask the right question about White’s incentive alignment. Typically, a US small-cap has a value of $1B, produces earnings of $96M, and pays its CEO at roughly $2.7M annually. Allowing for CWAY’s size and performance, in terms of market cap and earnings, it seems that White is paid on a similar level to the average US small-cap CEO This may mean that CWAY is appropriately compensating its CEO.
Hopefully this article has given you insight on how shareholders should think about CWAY’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:
- 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 CWAY? 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.