Executive pay being topical (and rightly so) on this board, I planned to review directors remuneration of a company that is also one of my largest holdings and share my finidings (http://www.stockopedia.com/content/examining-a-fresh-investment-case-58416). So with few days off, I began with collating numbers for last 4 years from 2008 till 2011. After analysing those I am left with some open questions:

1) Is the remuneration policy of this company Shareholder friendly?
2) If yes what is the definition (or measurement) of a Shareholder friendly policy?
3) Or is it one of those things - “Beauty lies in the eye of beholder” and therefore very hard to define?

Let me start with a short background to build the context. The company is Record PLC listed on LSE (not AIM) in 2007. The early years were good but since 2008 the profitability has been declining due to the economic situation. As one could make out looking at the financials below:

in Millions                                2010-2011          2009-2010        2008-2009         2007-2008
Market Cap as of 31st Mar   51                         136                     146                       177
Revenue                                  28.2                      33.4                    46.8                      66.2
Net Profit                                 8.91                       11.9                   19.3                      27.9
EPS in pence                         4                            5.4                      8.7                        12.6
ROE %                                    32.5                      45                        84.3                      167
Dividend per share              0.046                    0.046                  0.046                    0.022


In last 4 years market cap has declined to a third of what is was on 31st Mar 2008, so has the revenue and profits. The dividend has been maintained but it is expected to decline significantly for year 2011-2012 to 1.50 pence from 4.59 pence. The company is debt free, profitable with a healthy ROE and balance sheet (Cash c 20 million).

On the other hand as of today the market cap is c £27million and share price is languishing around 13p, significantly lower than it listing price of 150 pence http://www.google.co.uk/finance?q=LON:REC
It can be said that shareholder wealth has significantly declined over the long term. But what I am not sure is if Executive directors sqalary + rewards (bonuses) which are roughly 100% of salary are excessive or not? So looking at the remuneration numbers over these years:

                                                                 2010-2011         2009-2010         2008-2009        2007-2008
Exec Directors Remuneration          £3,308,023.00  £3,609,367.00    £6,286,930.00  £9,572,895.00
Non Exec Directors Remuneration £155,000.00     £145,000.00       £115,000.00      £52,841.00
Total                                                      £3,463,023.00   £3,754,367.00    £6,401,930.00  £9,625,736.00


Directors remuneration has reduced to a third of what it was in 2007-2008 which is line with the decline in…

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