Leading Golden Cariboo Resources Ltd (TSXV:GCC.H) as the CEO, Tom Kennedy took the company to a valuation of CA$1.04M. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. 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 Kennedy’s pay and compare this to the company’s performance over the same period, as well as measure it against other Canadian CEOs leading companies of similar size and profitability. See our latest analysis for Golden Cariboo Resources

What has been the trend in GCC.H’s earnings?

GCC.H 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 GCC.H released negative earnings of -CA$0.1M . But this is an improvement on prior year’s loss of -CA$0.2M, which may signal a turnaround since GCC.H has been loss-making for the past five years, on average, with an EPS of -CA$0.02. Given earnings are moving the right way, CEO pay should be reflective of Kennedy’s value creation for shareholders. In the same year, Kennedy’s total compensation increased over two-fold, reaching CA$34,000 , but off a low base. In addition to this, Kennedy’s pay is also comprised of non-cash items, which means that fluxes in GCC.H’s share price can impact the true level of what the CEO actually takes home at the end of the day.

Is GCC.H overpaying the CEO?

Though there is no cookie-cutter approach, as compensation should be tailored to the specific company and market, we can determine a high-level yardstick to see if GCC.H deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Kennedy’s incentive alignment. Normally, a Canadian small-cap is worth around $345M, produces earnings of $24M, and pays its CEO circa $770,000 annually. Normally I would use earnings and market cap to account for variations in performance, however, GCC.H’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Kennedy is remunerated sensibly relative to peers. On the whole, though GCC.H is loss-making, it seems like the CEO’s pay is sound.

What this means for you:

Are you a shareholder? You can breathe easy knowing that shareholder funds aren’t being used to overpay GCC.H’s CEO. However, on the flipside, you should ask whether Kennedy 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 GCC.H’s governance, look through our infographic report of the company’s board and management.

Are you a potential investor? Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in GCC.H, 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. To research more about these fundamentals, I recommend you check out our simple infographic report on GCC.H’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.