Canada Markets closed

Is Terra Firma Capital Corporation's (CVE:TII) CEO Pay Justified?

Simply Wall St

In 2016 Glenn Watchorn was appointed CEO of Terra Firma Capital Corporation (CVE:TII). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Terra Firma Capital

How Does Glenn Watchorn's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Terra Firma Capital Corporation has a market cap of CA$32m, and is paying total annual CEO compensation of CA$420k. (This figure is for the year to December 2017). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at CA$390k. We took a group of companies with market capitalizations below CA$267m, and calculated the median CEO total compensation to be CA$143k.

It would therefore appear that Terra Firma Capital Corporation pays Glenn Watchorn more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Terra Firma Capital has changed from year to year.

TSXV:TII CEO Compensation, April 18th 2019

Is Terra Firma Capital Corporation Growing?

Terra Firma Capital Corporation has reduced its earnings per share by an average of 43% a year, over the last three years (measured with a line of best fit). Its revenue is up 4.9% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Terra Firma Capital Corporation Been A Good Investment?

Given the total loss of 21% over three years, many shareholders in Terra Firma Capital Corporation are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We examined the amount Terra Firma Capital Corporation pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

We think many shareholders would be underwhelmed with the business growth over the last three years.

Arguably worse, investors are without a positive return for the last three years. This analysis suggests to us that the CEO is paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling Terra Firma Capital shares (free trial).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.