Art Raschbaum took the helm as Maiden Holdings Ltd’s (NASDAQ:MHLD) CEO and grew market cap to USD$571.22M recently. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Raschbaum’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 Maiden Holdings
What has been the trend in MHLD’s earnings?
Earnings is a powerful indication of MHLD’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Raschbaum’s performance in the past year. Over the last year MHLD released negative earnings of -$140.2M , compared to the previous year’s positive earnings. Furthermore, MHLD hasn’t always been loss-making, with an average EPS of $0.78 over the past five years. During times of unprofitability the company may be going through a period of reinvestment and growth, or it can be a sign of some headwind. In any event, CEO compensation should be reflective of the current state of the business. In the most recent report, Raschbaum’s total remuneration dropped by a marginal -4.21%, to $2,677,423. Furthermore, Raschbaum’s pay is also made up of 31.12% non-cash elements, which means that fluctuations in MHLD’s share price can move the actual level of what the CEO actually receives.
Is MHLD overpaying the CEO?
Despite the fact that one size does not fit all, since remuneration should be tailored to the specific company and market, we can determine a high-level yardstick to see if MHLD is an outlier. This exercise can help shareholders ask the right question about Raschbaum’s incentive alignment. Typically, a US small-cap has a value of $1B, creates earnings of $96M, and pays its CEO at roughly $2.7M per year. Typically I would use earnings and market cap to account for variations in performance, however, MHLD’s negative earnings lower the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Raschbaum is being paid within the bounds of reasonableness. Putting everything together, although MHLD is loss-making, it seems like the CEO’s pay is sound.
What this means for you:
Are you a shareholder? My conclusion is that Raschbaum is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. To find out more about MHLD’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? While CEO compensation is a good indication for how well-aligned the company leader is its investors, it is certainly not enough to simply base your investment decision on this metric. Regardless of whether Raschbaum’s pay is above or below peers, the more important factors to look at is MHLD’s track record of performance and future outlook moving forward. To research more about these fundamentals, I recommend you check out our simple infographic report on MHLD’s financial metrics.
PS. If you are not interested in Maiden Holdings anymore, you can use our free platform to see my list of over 50 sustainable companies producing great returns.
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.