In This Article:
Wayne Bos is the CEO of Progility PLC (AIM:PGY), which has recently grown to a market capitalization of UK£838.39K. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. I will break down Bos’s pay and compare this to the company’s performance over the same period, as well as measure it against other UK CEOs leading companies of similar size and profitability. View our latest analysis for Progility
What has been the trend in PGY’s earnings?
PGY 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 PGY produced negative earnings of -UK£1.39M , which is a further decline from prior year’s loss of -UK£1.08M. Moreover, on average, PGY has been loss-making in the past, with a 5-year average EPS of -UK£0.34. In the situation of unprofitability the company may be incurring a period of reinvestment and growth, or it can be a signal of some headwind. In any event, CEO compensation should emulate the current condition of the business. From the latest report, Bos’s total remuneration dropped by a minor -4.76%, to UK£160.00K. Although I couldn’t find information on the breakdown of Bos’s pay, if some portion were non-cash items such as stocks and options, then fluctuations in PGY’s share price can move the real level of what the CEO actually collects at the end of the year.
What’s a reasonable CEO compensation?
Even though one size does not fit all, since remuneration should be tailored to the specific company and market, we can evaluate a high-level benchmark to see if PGY deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Bos’s incentive alignment. Normally, a UK small-cap is worth around £696M, creates earnings of £67M, and remunerates its CEO circa £1M per annum. Usually I would use earnings and market cap to account for variations in performance, however, PGY’s negative earnings reduces the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Bos is remunerated sensibly relative to peers. Overall, although PGY is loss-making, it seems like the CEO’s pay is appropriate.
Next Steps:
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Bos remunerated appropriately based on other factors we have not covered today? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. If you have not done so already, I urge you to complete your research by taking a look at the following: