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 fashion a high-level yardstick to see if TEX deviates substantially from its peers. This exercise can help shareholders ask the right question about Roe’s incentive alignment. On average, an Australian small-cap has a value of $140M, creates earnings of $10M, and pays its CEO circa $500,000 per annum. Normally I would look at market cap and earnings as a proxy for performance, however, TEX’s negative earnings lower the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Roe is remunerated sensibly relative to peers. Putting everything together, although TEX is loss-making, it seems like the CEO’s pay is appropriate.

What this means for you:

Are you a shareholder? You can breathe easy knowing that shareholder funds aren’t being used to overpay TEX’s CEO. However, on the flipside, you should ask whether Roe 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 TEX’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 Roe’s pay is above or below peers, the more important factors to look at is TEX’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 TEX’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.