Does Benton Resources Inc’s (CVE:BEX) CEO Pay Reflect Performance?
Stephen Stares took the helm as Benton Resources Inc’s (TSXV:BEX) CEO and grew market cap to CA$4.61M recently. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Stares’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. Check out our latest analysis for Benton Resources
Did Stares create value?
Earnings is a powerful indication of BEX’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Stares’s performance in the past year. Over the last year BEX released negative earnings of -CA$1.62M , which is a further decline from prior year’s loss of -CA$698.06K. Moreover, on average, BEX has been loss-making in the past, with a 5-year average EPS of -CA$0.041. In the situation of negative earnings, the company may be facing a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should echo the current state of the business. In the most recent financial statments, Stares’s total remuneration dropped by a minor -0.21%, to CA$220.00K. Although I couldn’t find information on the composition of Stares’s pay, if some portion were non-cash items such as stocks and options, then fluxes in BEX’s share price can impact the true level of what the CEO actually receives.
What’s a reasonable CEO compensation?
Even though there is no cookie-cutter approach, as compensation should account for specific factors of the company and market, we can evaluate a high-level benchmark to see if BEX is an outlier. This outcome helps investors ask the right question about Stares’s incentive alignment. On average, a Canadian small-cap is worth around $345M, creates earnings of $24M, and remunerates its CEO at roughly $770,000 per year. Typically I would use earnings and market cap to account for variations in performance, however, BEX’s negative earnings lower the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Stares is paid aptly compared to those in similar-sized companies. Overall, though BEX is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
Next Steps:
In order to determine whether or not you should invest in BEX, your thesis should be built on fundamentals. Even though CEO pay isn’t technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how BEX makes money, and factors impacting your return on investment. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
Governance: To find out more about BEX’s governance, look through our infographic report of the company’s board and management.
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.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BEX? 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.