Here's Why We Think Hanwei Energy Services Corp.'s (TSE:HE) CEO Compensation Looks Fair

By
Simply Wall St
Published
January 07, 2022
TSX:HE
Source: Shutterstock

The performance at Hanwei Energy Services Corp. (TSE:HE) has been rather lacklustre of late and shareholders may be wondering what CEO Fulai Lang is planning to do about this. At the next AGM coming up on 12 January 2022, they can influence managerial decision making through voting on resolutions, including executive remuneration. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We think CEO compensation looks appropriate given the data we have put together.

See our latest analysis for Hanwei Energy Services

How Does Total Compensation For Fulai Lang Compare With Other Companies In The Industry?

According to our data, Hanwei Energy Services Corp. has a market capitalization of CA$2.9m, and paid its CEO total annual compensation worth CA$71k over the year to March 2021. We note that's a decrease of 41% compared to last year. Notably, the salary which is CA$56.5k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below CA$255m, reported a median total CEO compensation of CA$566k. This suggests that Fulai Lang is paid below the industry median. What's more, Fulai Lang holds CA$521k worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary CA$56k CA$120k 80%
Other CA$14k - 20%
Total CompensationCA$71k CA$120k100%

On an industry level, roughly 41% of total compensation represents salary and 59% is other remuneration. Hanwei Energy Services pays out 80% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
TSX:HE CEO Compensation January 7th 2022

A Look at Hanwei Energy Services Corp.'s Growth Numbers

Hanwei Energy Services Corp.'s earnings per share (EPS) grew 24% per year over the last three years. In the last year, its revenue is up 26%.

This demonstrates that the company has been improving recently and is good news for the shareholders. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Hanwei Energy Services Corp. Been A Good Investment?

Few Hanwei Energy Services Corp. shareholders would feel satisfied with the return of -50% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

The fact that shareholders have earned a negative share price return is certainly disconcerting. This diverges with the robust growth in EPS, suggesting that there is a large discrepancy between share price and fundamentals. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board’s judgement and decision-making is aligned with their expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Hanwei Energy Services (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.

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.

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