Anthony Marucci took the helm as Celldex Therapeutics Inc’s (NASDAQ:CLDX) CEO and grew market cap to USD$305.45M 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. Today we will assess Marucci’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. See our latest analysis for CLDX
What has been the trend in CLDX’s earnings?
CLDX 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. Recently, CLDX released negative earnings of -$125M . However, this is an improvement on prior year’s loss of -$131M, which may signal a turnaround since CLDX has been loss-making for the past five years, on average, with an EPS of -$1.03. Given earnings are moving the right way, CEO pay should echo Marucci’s value creation for shareholders. In the same year, Marucci’s total compensation declined by more than half of the prior year’s level, to $2,370,195. Furthermore, Marucci’s pay is also made up of 15.79% non-cash elements, which means that fluxes in CLDX’s share price can impact the true level of what the CEO actually collects at the end of the year.
Is CLDX overpaying the CEO?
Despite the fact that no standard benchmark exists, as remuneration should account for specific factors of the company and market, we can fashion a high-level thresold to see if CLDX deviates substantially from its peers. This exercise can help shareholders ask the right question about Marucci’s incentive alignment. Generally, a US small-cap has a value of $1B, creates earnings of $96M, and remunerates its CEO circa $2.7M per annum. Usually I would use earnings and market cap to account for variations in performance, however, CLDX’s negative earnings reduces the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Marucci is remunerated sensibly relative to peers. Overall, even though CLDX is unprofitable, it seems like the CEO’s pay is sound.
What this means for you:
Are you a shareholder? Hopefully this article has given you insight on how shareholders should think about CLDX’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. To find out more about CLDX’s governance, look through our infographic report of the company’s board and management.