Ann: Preliminary Final Report, page-63

“…does it make sense that the CEO of ANY public Company is paid 2% of the MC.”

A question on management expenses is always valid to ask, and is one that some posters clearly see as key. It relates to the issue of the CEO’s remuneration that for years has consistently arisen during the deeper phase of the mood swings when share prices are low. In fact, peaking of both the CDY Remuneration Index and the Mal Index in combination I have found to be quite valuable for timing purposes over the last few years.

Since it was obvious that the issue was a matter of concern in early 2016 I thought it worthy of exploring and reported to the forum at the time. For anyone wishing to revisit that post, the link is [HERE]. For those that don’t, the points made in the cut-&-paste extract below would remain relevant.

"The annual report of every listed company must include a Remuneration Report on the costs of its senior management. During the Xmas break I spent a few hours looking through the 2015 reports of three or four dozen smaller biotechs in order to make some comparisons.

One thing I found is that Cellmid is almost unique within the group in having only one executive (salaried) director. The majority have two or more executive directors, sometimes with an executive chairman as well, and one or two employ both a CEO and a managing director.

The second result was that, particularly measured against market cap or size of reported losses, CDY is well down the list in terms of comparative costs.

For example, one company with a market cap of $10m and a 2015 loss of -$16m paid its top executive team $2.4m ($2.9m in 2014, and another $1m to other top management). Another with a market cap of $11m and loss of -$25m paid out $1.53m to the executive members of its board for their 2015 efforts. Only three of the companies that I looked at had lower executive expenses ($513K, $357K and $334K) and these had market caps of $6m, $7m and $12m respectively.

The average executive expense per company was $898K, average loss -$5.6m and the average market cap was $14.9m.

Cellmid’s figures compare very favourably to each of these, with an executive expense of $548K, a loss of -$3.3m and a market cap of $24m (at end of FY2015)."

So one company was prepared to meet its executive board costs at 24% to 29% of its market cap over two years. Another at 14% of MC; average was 6%; CDY was 2%.

Updated CDY figures are even more favourable. Total Board remuneration for FY2016 was $775K (Halasz $552K as executive) and in FY2017 was $592K (Halasz $421K).

Whether these are encouraging facts or inconvenient truths will depend upon each individual’s experience and attitude to investing.

T7