What’s a reasonable CEO compensation?

Though there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can gauge a high-level thresold to see if LA deviates substantially from its peers. This exercise helps investors ask the right question about Amberg’s incentive alignment. Generally, a Canadian small-cap has a value of $345M, generates earnings of $24M, and pays its CEO circa $770,000 per annum. Normally I would use earnings and market cap to account for variations in performance, however, LA’s negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Amberg is paid aptly compared to those in similar-sized companies. Putting everything together, though LA is unprofitable, it seems like the CEO’s pay is appropriate.

Next Steps:

My conclusion is that Amberg 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. 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 LA’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 LA? 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.