- Oops!Something went wrong.Please try again later.
Kevin Rountree took the helm as Games Workshop Group PLC’s (LSE:GAW) CEO and grew market cap to UK£718.13M 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 Rountree’s pay and compare this to the company’s performance over the same period, as well as measure it against other UK CEOs leading companies of similar size and profitability. View our latest analysis for Games Workshop Group
Did Rountree create value?
Earnings is a powerful indication of GAW’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Rountree’s performance in the past year. In the past year, GAW released a profit of UK£51.02M , which is an increase of 160.15% from its prior year’s earnings of UK£19.61M. This is a positive indication that GAW has strived to maintain a good track record of profitability in the face of any headwinds. As profits are moving up and up, CEO pay should be reflective of Rountree’s hard work. During the same period, Rountree’s total compensation declined by a trivial -0.20%, to UK£401.00K. Although I couldn’t find information on the composition of Rountree’s pay, if some portion were non-cash items such as stocks and options, then fluctuations in GAW’s share price can impact the actual level of what the CEO actually takes home at the end of the day.
Is GAW overpaying the CEO?
Despite the fact that no standard benchmark exists, as remuneration should account for specific factors of the company and market, we can gauge a high-level base line to see if GAW is an outlier. This exercise can help shareholders ask the right question about Rountree’s incentive alignment. On average, a UK small-cap is worth around £696M, produces earnings of £67M, and remunerates its CEO at roughly £1M annually. Based on the size of GAW in terms of market cap, as well as its performance, using earnings as a proxy, it appears that Rountree is being paid well below other similar UK CEOs in the small-cap industry.
In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Rountree’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
Governance: To find out more about GAW’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 GAW? 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.