Investing in Undervalued Stocks

Management Compensation Evaluation - How Does the Change in Compensation Compare to the Performance of Your Stock's Share Price

Management Compensation Evaluation - How Does the Change in Compensation Compare to the Performance of Your Stock's Share Price

In the management compensation evaluation, I compare the change in management's compensation to the change in the company's share price, in order to evaluate if management's compensation is reasonable or not.

For the management compensation evaluation, I first calculate the change between management's compensation paid in year one and in year two. For this calculation, I use all the compensation data included in the company's proxy circular1.

Then I use the Historical Prices section on the stock's web page on Yahoo Finance to look up the historical quotes for the beginning and end of year two. (You can find the historical prices section in the top left menu after you have entered the stock's ticker in the Look Up search bar.) Finally, I compare the relative change of both in order to conclude if management's compensation is reasonable, neutral or excessive. In the table below you see the possible outcomes.

Share Price (% Change)  Management Compensation (% Change)  My Rating 
Increase Increase Reasonable
Increase Decrease Neutral
Decrease Increase Excessive
Decrease Decrease Reasonable

When management's compensation decreased in a period where it's share price increased, it depends on the reasons why management took this pay cut before I can form an opinion about the amount of compensation paid. Therefore I have a 'neutral' rating in these situations.


If you would like to be the first to be informed when I add new content to UndervaluedEquity.com, please leave your details in the name grab form on the Support page!

You can also support me directly by clicking on the advertisements that appeal to you, or by making a voluntarily donation with Paypal.

Your support helps me to speed up the process of adding great, free content to UndervaluedEquity.com!


Note: Normally, I consider a decrease in management compensation as a positive signal as the company can now instead invest this money in upgrading the value of its assets. However, when management has done an outstanding job - supported by an increase in its share price - I believe they have to be rewarded for such an achievement accordingly.


What Type of Content Can You Expect to Find on UndervaluedEquity.com

Main Section  Description 
News (RSS)  Today's News Related to the Global Energy and Mining Stocks. On this page a RSS feed is displayed with stock market news related to the energy and mining sectors. You can subscribe to this free RSS feed too!
My Due Diligence  How I Conduct My Stock's Due Diligence Investigation Process. If you want to know what I learned while I was conducting my due diligence, I recommend you to read all the chapters of the investigation process.
My Stock Watchlist  Are These the Best Stocks to Buy Today. In my stock watchlist you find stocks who offer great potential, but at the time I analysed these stocks they didn't comply with all my guidelines from my due diligence chapters. 
My Stock Portfolio 

Are These the Best Shares to Buy Now. As the year 2015 has just started, I believe it's about time that I share my stock portfolio with you. Therefore, you will find my updated stock portfolio on this page.



  comments powered by Disqus 


1 The proxy circular is normally the primary means for a company to communicate its corporate governance practices to its  shareholders. Shareholders expect the circular to articulate, in plain language, the governance practices and activities of the board, the qualifications of directors, the issuer’s executive compensation programs (particularly as they relate to the alignment between compensation and the company’s long-term strategic objectives) and risk management strategy. Such disclosure assists shareholders in assessing the board’s performance and its ability to work with management to determine corporate strategy and oversee the management of the company’s primary risks. It also explains how the compensation structure incents management to achieve corporate objectives without exceeding the company’s appetite for risk.

About Jeroen Snoeks

Jeroen Snoeks - UndervaluedEquity.com

Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for investors passionate about investing in undervalued stocks. Through UndervaluedEquity.com, he shares his experience and knowledge and will soon reveal his personal stock portfolio.

  Positive SSL Transparant Background