As we get into the thick of ASX reporting season, it seems like a good time to look back on last year’s compensation league table and see what everyone got paid in the “Long Tail” of the ASX biosciences.
Executive compensation is a critically important success parameter for a company and it tells you a great deal about management’s attitude towards responsible and effective resource allocation. I’d like to state from the outset – I am no ‘commie‘. I like money, though I am a capitalist with a slightly pink tinge. That means that I am perfectly comfortable with CEOs and Directors/Chairs getting very VERY well paid, but not infinitely paid, and not in a fashion that is decoupled from company performance. Whenever I diligence a company, executive compensation is my first “sniff” test, particularly for very early stage companies. It tells you pretty much everything you need to know about the corporate culture. This is particularly the case if an early-stage CEO is taking a huge pay check because it probably means they don’t really believe in the future of the technology – they are effectively electing to take $s of the table now, instead of a big return-on-effort in the future.
Here are the 2014 rankings:
Well, no real surprises at the top of this particular league table.
Dr Philippe Wolgen from Clinuvel (ASX : CUV) always tops this list but then we should all be a bit sympathetic. After all, he had to move from his beautiful Switzerland in order to rough it Singapore* (truly on the company’s dime, they even pay his rent). Besides, he’s a medic and also the company’s Chief Medial Officer and…well, that’s just life at the top, I guess. But hey, Clinuvel is selling a product! Er… sort of… But, if you thought $1.8m was a lot of dosh for a company with a $125m market cap and ~$3.5m in revenues, brace yourself. In their freshly-minted annuals for 2015, you will find that the good Dr. Wolgen received a total compensation package of $6.3m, including over $4m in performance rights. Its also worth knowing he also generously took $150k in lieu of 50 days unused leave…clearly $3k/day is the going rate for Philippe to sit on his posterior, sipping Aperol Spritz, and dreaming of his chateau on Lago di Garda.
The redoubtable Philippa Lewis jumped up the rankings a bit to take out 2nd spot, mainly because she claimed a cheque for taking Simavita (ASX : SVA) public. We are grateful. In general, I don’t believe that performance bonuses should be awarded for taking a company public, but rather for an “effective” IPO. Since the stock dropped 20% or so from listing to FYE, and has been basically flat since then, it will be interesting to see what FY15 looks like. While I am talking about the power-ladies in the table, as I have previously alluded in this forum, the lovely Jacinth Fairley of Starpharma (ASX : SPL) is fairly close to the top of the pack (pardon the pun). She is usually #2 or #3 on this list, and generally takes a decent slab of options/performance rights. Incidentally, I don’t know why she calls herself “Jackie” – I think that Jacinth is a lovely name (sincerely). Exotic name not withstanding, she is overpaid, even considering a “meaty” $2m signing payment from AstraZeneca.
Interesting to see that two of my favourite “hollow chocolate bunny” regenerative medicine companies – Cynata (ASX : CYP) and Regeneus (ASX : RGS) – get special mention. Cynata, in fact gets two gongs for both Stewie Washer and Ross McD. Well done lads! Extract your cash while you can! John Martin of Regeneus gets a special mention for the taking the most off the table while delivering the least value to shareholders, including a non-existent market cap and impressive share price destruction. Tells you everything you need to know about the company, really.
To my mind, the real star performer is Rick Carreon of Impedimed (ASX : IPD). We always have to allow that his package is going to be a bit more competitive given he is US-based, but I think his total compensation is spot-on relative to the performance of the company, possibly even a little under. Scott Richards also takes a very reasonable package given that Mayne (ASX : MYX) is a revenue-stage company and has a totally different level of execution complexity. Perhaps somewhat controversially, I am also not completely irritated by the ‘package’ for Garry Phillips of Pharmaxis-fame (ASX : PXS). He has accomplished quite a lot for the company, at least relative to where the company was. Possibly a little on the high-side given the market cap of the company, but not offensively so.
I would like to make some special mentions outside of this “top 10”:
- Mike Kavenagh at Nanosonics (ASX : NAN), who missed the top 10 by 3 grand (a mere day of holiday pay for Philippe), having slid from the board to the hot seat (having finally jacked in his job at ResMed). I’m ok with that – in general he is building quite a bit of value for shareholders, even if still think the products are a bit goofy.
- Wayne Stringer at Probiotec (ASX : PBP) who, having bled the company he founded dry (a whopping base salary for years), he conducted an executive search to find a replacement for his retirement. After what was clearly an exhaustive and comprehensive talent scouting exercise he appointed…drum roll…his son Wesley Stringer as CEO! Apparently on at least a genetic basis, Wesley was the standout candidate – according to Jared Stringer (honestly, I can’t even spell nepo… er… tism…).
- Graeme Vesey, the ‘luminary’ co-founder of Regeneus just about made it 2 from 2 for “Co-CEO’s” from regenerative medicine companies to make it into the top 10 (must be a lot of money in MSCs?).
- And… as always … Geoff Cumming – The Man with the Gomer. Geoff from Anteo Diagnostics (ASX : ADO) pulled up as the 14th most highly paid executive in Australian biotech, with a ~$520,000 package. But that’s ok, because his shareholders love him and he can do no wrong. Hmmmm.
… In conclusion:
Compensation matters. I would like to see more directors/chairs get paid on the basis of performance, rather than eye-watering base salaries. I also think there needs to be more robust industry benchmarking, perhaps something that our esteemed industry forums could take a more active role in pushing (i.e. AusBiotech). But most of all, shareholders need to speak out. There are some pretty stunning examples of compensation largess in the industry and it needs to be called out.
I’ll be back again in a few months time to comment on who exercised some restraint, and who continued to gouge their shareholders. Just like Josh Starling.
*I should be clear to all my Singaporean readers, approximately 5%, that I LOVE Singapore. In fact, I prefer Singapore to Switzerland, Lor…!