In This Article:
Jim Cox is the CEO of British and Malayan Holdings Limited (SGX:CJN), which has recently grown to a market capitalization of S$24.52M. 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 Cox’s pay and compare this to the company’s performance over the same period, as well as measure it against other SGX-listed CEOs leading companies of similar size and profitability. Check out our latest analysis for British and Malayan Holdings
What has CJN’s performance been like?
Profitability of a company is a strong indication of CJN’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Cox’s performance. Most recently, CJN produced negative earnings of -S$54.94K . However, this is an improvement on prior year’s loss of -S$1.67M, though CJN hasn’t always been loss-making, given its average EPS of S$0.073 over the past five years. Given earnings are moving the right way, CEO pay should echo Cox’s hard work. In the same year, Cox’s total remuneration grew by a mere 4.17% to S$375.00K. Moreover, Cox’s pay is also made up of non-cash elements, which means that fluxes in CJN’s share price can impact the real level of what the CEO actually receives.
Is CJN’s CEO overpaid relative to the market?
Despite the fact that one size does not fit all, as remuneration should be tailored to the specific company and market, we can estimate a high-level benchmark to see if CJN is an outlier. This outcome can help shareholders ask the right question about Cox’s incentive alignment. Typically, a SGX small-cap is worth around SG$396M, generates earnings of SG$29.7M, and pays its CEO circa SG$1.2M annually. Normally I would use earnings and market cap to account for variations in performance, however, CJN’s negative earnings lower the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Cox is paid aptly compared to those in similar-sized companies. Overall, though CJN is loss-making, it seems like the CEO’s pay is fair.
Next Steps:
My conclusion is that Cox 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 highly recommend you to complete your research by taking a look at the following: