Is GOME Retail Holdings Limited’s (HKG:493) CEO Paid Enough Relative To Peers?

Jun Wang is the CEO of GOME Retail Holdings Limited (HKG:493). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for GOME Retail Holdings

How Does Jun Wang’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that GOME Retail Holdings Limited has a market cap of HK$14b, and reported total annual CEO compensation of CN¥1.2m for the year to December 2018. Notably, the salary of CN¥1.2m is the vast majority of the CEO compensation. We examined companies with market caps from CN¥7.1b to CN¥23b, and discovered that the median CEO total compensation of that group was CN¥3.5m.

Pay mix tells us a lot about how a company functions versus the wider industry, and it’s no different in the case of GOME Retail Holdings. Talking in terms of the sector, salary represented approximately 88% of total compensation out of all the companies we analysed, while other remuneration made up 12% of the pie. GOME Retail Holdings is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation

Most shareholders would consider it a positive that Jun Wang takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance. You can see a visual representation of the CEO compensation at GOME Retail Holdings, below.

SEHK:493 CEO Compensation March 27th 2020
SEHK:493 CEO Compensation March 27th 2020

Is GOME Retail Holdings Limited Growing?

On average over the last three years, GOME Retail Holdings Limited has shrunk earnings per share by 114% each year (measured with a line of best fit). It saw its revenue drop 6.2% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has GOME Retail Holdings Limited Been A Good Investment?

Since shareholders would have lost about 31% over three years, some GOME Retail Holdings Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

GOME Retail Holdings Limited is currently paying its CEO below what is normal for companies of its size.

The compensation paid to Jun Wang is lower than is usual at similar sized companies, but the eps growth is lacking, just like the returns (over three years). While one could argue it is appropriate for the CEO to be paid less than other CEOs of similar sized companies, given company performance, we would not call the pay overly generous. Shifting gears from CEO pay for a second, we’ve picked out 2 warning signs for GOME Retail Holdings that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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