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Should You Worry About Geron Corporation’s (NASDAQ:GERN) CEO Pay Check?

Chip Scarlett took the reins as CEO of Geron Corporation’s (NASDAQ:GERN) and grew market cap to US$531.76M 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. I will break down Scarlett’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. Check out our latest analysis for Geron

Did Scarlett create value?

GERN 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. Over the last year GERN produced negative earnings of -US$27.92M . However, this is an improvement on prior year’s loss of -US$29.54M, which may signal a turnaround since GERN has been loss-making for the past five years, on average, with an EPS of -US$0.36. As profits are moving up and up, CEO pay should be reflective of Scarlett’s hard work. Over the same period Scarlett’s total remuneration dropped by more than half of the prior year’s level, to US$2.16M. Moreover, Scarlett’s pay is also made up of 53.96% non-cash elements, which means that variabilities in GERN’s share price can impact the true level of what the CEO actually collects at the end of the year.

NasdaqGS:GERN Past Future Earnings Apr 13th 18
NasdaqGS:GERN Past Future Earnings Apr 13th 18

What’s a reasonable CEO compensation?

Even though one size does not fit all, as remuneration should be tailored to the specific company and market, we can evaluate a high-level yardstick to see if GERN deviates substantially from its peers. This exercise can help direct shareholders to ask the right question about Scarlett’s incentive alignment. Generally, a US small-cap has a value of $1B, produces earnings of $96M, and remunerates its CEO circa $2.7M per year. Usually I’d use market cap and profit as factors determining performance, however, GERN’s negative earnings lower the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Scarlett is remunerated sensibly relative to peers. Putting everything together, although GERN is unprofitable, it seems like the CEO’s pay is appropriate.

Next Steps:

Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in GERN, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Governance: To find out more about GERN’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 GERN? 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.

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