John Maslowski took the helm as Fibrocell Science Inc’s (NASDAQ:FCSC) CEO and grew market cap to USD$9.98M recently. 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 Maslowski’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 Fibrocell Science
What has FCSC performance been like?
FCSC 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. In the past year, FCSC released negative earnings of -$26.8M . However, this is an improvement on prior year’s loss of -$29.4M, which may signal a turnaround since FCSC has been loss-making for the past five years, on average, with an EPS of -$15.1. Since earnings are heading towards the right direction, CEO pay should represent Maslowski’s hard work. Over the same period Maslowski’s total compensation increased by a mere 2.66% to $639,036.
What’s a reasonable CEO compensation?
Though no standard benchmark exists, since compensation should account for specific factors of the company and market, we can determine a high-level yardstick to see if FCSC is an outlier. This outcome can help shareholders ask the right question about Maslowski’s incentive alignment. Normally, a US small-cap has a value of $1B, creates earnings of $96M, and pays its CEO circa $2.7M annually. Usually I would use earnings and market cap to account for variations in performance, however, FCSC’s negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Maslowski is being paid within the bounds of reasonableness. Putting everything together, though FCSC is loss-making, it seems like the CEO’s pay is fair.
What this means for you:
Are you a shareholder? You can breathe easy knowing that shareholder funds aren’t being used to overpay FCSC’s CEO. However, on the flipside, you should ask whether Maslowski 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 FCSC’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? In order to determine whether or not you should invest in FCSC, your thesis should be built on fundamentals. Even though CEO pay isn’t technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how FCSC makes money, and factors impacting your return on investment. To research more about these fundamentals, I recommend you check out our simple infographic report on FCSC’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.