Investing in Undervalued Stocks

San Gold Corporation - Management Compensation Evaluation

San Gold Corporation - Management Compensation Evaluation

Management Compensation Evaluation as of July 12, 2014

In the article: Management Compensation Evaluation - How Does the Change in Compensation Compare to the Performance of Your Stock's Share Price, I explain how I compare the change in management's compensation to the change in the company's share price.

The data from the following table is taken from the most recent Proxy Circular filed on SEDAR on May 31, 2013 and is a summary of the compensation paid to Named Executive Officers of the company in the financial years 2011 and 2012.

NEO Compensation Table

Named Executive Officer (NEO)  Principal Position  Year  Total Compensation 
George Pirie  President and CEO  2011  $956,349 
President and CEO  2012  $615,585 
Dale Ginn  Executive Vice-Chairman  2011  $867,149 
Executive Vice-Chairman  2012  $564,210 
Gestur Kristjansson  CFO  2011  $703,716 
CFO  2012  $512,010 
Ian Berzins  COO  2011  $793,549 
COO  2012  $522,835 
Total Compensation for all NEO's  2011  $3,320,763 
Total Compensation for all NEO's  2012  $2,214,640 

The data from following table is taken from the Proxy Circulars related to the financial years 2011 and 2012 and is a summary of the compensation paid to the company's directors.

Director Compensation Table

Name  Year  Total Compensation 
Hugh Wynne  2011  $332,777
2012  $203,710 
Richard Boulay  2011  $360,000 
2012  NA 
Courtney Shearer  2011  386,000 
2012  NA 
Benjamin Hubert  2011  $427,685 
2012  $310,710 
Michael Power  2011  $427,685 
2012  $254,210 
James McCutcheon  2011  $156,493 
2012  NA 
Stephen Harapiak  2011  $510,471 
2012  $251,210 
Michael Anderson  2011  $510,471 
2012  $260,210 
Robert Brennan  2011  NA 
2012  $20,000 
Total Compensation for all Directors  2011  $2,601,111  
2012 $1,300,050  

Total Management Compensation Table

Description   Year  Total Compensation  Difference  Difference % 
Total Management Compensation   2011   $5,921,874  NA  NA 
2012   $3,514,690    -$2,407,184  -40.6% 

In order to 'measure' the quality of management's achievements, I compare the change in management's compensation to the change in the company's share price, using the historical quotes tool from Yahoo Finance.

Historical Quotes Tool from Yahoo Finance

Date  Close  Change  % Change 
December 30, 2011  1.89  -1.10  -58.2% 
December 31, 2012  0.79 

My Commentary and Conclusion Regarding this Management Compensation Evaluation

The total compensation paid declined by $2,407,184 or 40.6% from 2011 to 2012. Normally, I consider a decline in management compensation as a bullish 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.

As you can see in the table above - which includes the historical quotes from Yahoo Finance - the long term shareholders in San Gold Corporation had a horrible year in 2012, losing as much as 58.2% of the value invested. However, as management's compensation decreased while the company's share price decreased as well, I rate management's compensation as 'Reasonable' for 2012.


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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.

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