Management compensation
I have been researching management compensation in small-cap companies that we currently own or have owned in the recent past. Unfortunately, the only solvent, micro-cap medical device company that we are familiar with is Pyng. A past medical device company that we owned is now in corporate happy hunting ground. To establish some kind of standard, I used some data from our junior biotech companies. The similarity to Pyng is very limited. Capitalization, cash and cash equivalents etc. are very different. However, I think some trends are obvious.
I have chosen the two smallest companies, Chromos Molecular and Continental Home Healthcare, neither of which is profitable. Both, like Pyng, have had plummeting share prices, making the options of little value. They happen to have the lowest compensation levels of the companies I examined. For positions similar to David’s and Judy’s we have the following compensation levels.
CHT.TO Salary - $129,500 Stock Options – 50,000
CHR.TO Salary - $186,885 Stock Options – 75,000
David and Judy’s compensation of $145,000 split between them is, in my analysis, very low, particularly given what I perceive to be a very stressful working environment. Still, Pyng does not have the capital to provide reasonable compensation.
Some Possibilities for Compensation
1. Provide a generous number of longer term, stock options. If management is able to grow revenue, cash flow and earnings, the stock price will respond accordingly. Options, with five-year terms, should provide a very good return.
2. Increase the actual salary levels as financial resources permit.
I also believe that Michael Jacobs should be compensated commensurate with his responsibilities.
While I know that I have opened up a lot of items for discussion, I do not wish to detract from the discussion of the escrow shares. However, I think it important to examine issues that would likely arise, if the escrow extension were defeated.
Best regards to all Pyngers.
Regards,
Ed |
