Andy Feinberg took the helm as Brightcove Inc’s (NASDAQ:BCOV) CEO and grew market cap to USD$259.75M recently. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Feinberg’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. See our latest analysis for BCOV

What has BCOV performance been like?

Profitability of a company is a strong indication of BCOV’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Feinberg’s performance. Recently, BCOV released negative earnings of -$23M , which is a further decline from prior year’s loss of -$5M. Moreover, on average, BCOV has been loss-making in the past, with a 5-year average EPS of -$1.36. During times of unprofitability the company may be incurring a period of reinvestment and growth, or it can be a sign of some headwind. In any case, CEO compensation should echo the current condition of the business. In the latest financial statments, Feinberg’s total remuneration declined by a trivial -2.01%, to $1,003,134.

Is BCOV’s CEO overpaid relative to the market?

While one size does not fit all, since remuneration should account for specific factors of the company and market, we can estimate a high-level yardstick to see if BCOV is an outlier. This exercise helps investors ask the right question about Feinberg’s incentive alignment. On average, a US small-cap is worth around $1B, creates earnings of $96M, and pays its CEO circa $2.7M per annum. Normally I’d use market cap and profit as factors determining performance, however, BCOV’s negative earnings reduces the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Feinberg is being paid within the bounds of reasonableness. Putting everything together, even though BCOV is unprofitable, it seems like the CEO’s pay is appropriate.

What this means for you:

Are you a shareholder? My conclusion is that Feinberg is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. To find out more about BCOV’s governance, look through our infographic report of the company’s board and management.

Are you a potential investor? While CEO compensation is a good indication for how well-aligned the company leader is its investors, it is certainly not enough to simply base your investment decision on this metric. Regardless of whether Feinberg’s pay is above or below peers, the more important factors to look at is BCOV’s track record of performance and future outlook moving forward. To research more about these fundamentals, I recommend you check out our simple infographic report on BCOV’s financial metrics.

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To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.