How Should Investors Feel About Industrial and Commercial Bank of China's (HKG:1398) CEO Remuneration?

Simply Wall St
October 27, 2020

Shu Gu became the CEO of Industrial and Commercial Bank of China Limited (HKG:1398) in 2016, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Industrial and Commercial Bank of China pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Industrial and Commercial Bank of China

Comparing Industrial and Commercial Bank of China Limited's CEO Compensation With the industry

At the time of writing, our data shows that Industrial and Commercial Bank of China Limited has a market capitalization of HK$2.0t, and reported total annual CEO compensation of CN¥707k for the year to December 2019. That's a fairly small increase of 5.1% over the previous year. We note that the salary portion, which stands at CN¥579.0k constitutes the majority of total compensation received by the CEO.

On comparing similar companies in the industry with market capitalizations above HK$62b, we found that the median total CEO compensation was CN¥1.5m. In other words, Industrial and Commercial Bank of China pays its CEO lower than the industry median.

Component20192018Proportion (2019)
Salary CN¥579k CN¥546k 82%
Other CN¥128k CN¥127k 18%
Total CompensationCN¥707k CN¥673k100%

Talking in terms of the industry, salary represented approximately 60% of total compensation out of all the companies we analyzed, while other remuneration made up 40% of the pie. Industrial and Commercial Bank of China is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

SEHK:1398 CEO Compensation October 27th 2020

A Look at Industrial and Commercial Bank of China Limited's Growth Numbers

Industrial and Commercial Bank of China Limited has seen its earnings per share (EPS) increase by 1.7% a year over the past three years. Its revenue is down 3.3% over the previous year.

We generally like to see a little revenue growth, but it is good to see a modest EPS growth at least. It's hard to reach a conclusion about business performance right now. This may be one to watch. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Industrial and Commercial Bank of China Limited Been A Good Investment?

Given the total shareholder loss of 12% over three years, many shareholders in Industrial and Commercial Bank of China Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As we touched on above, Industrial and Commercial Bank of China Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But the company isn't growing and total shareholder returns have been disappointing. We're not critical of the remuneration Shu receives, but it would be good to see improved returns to shareholders before compensation grows too much.

So you may want to check if insiders are buying Industrial and Commercial Bank of China shares with their own money (free access).

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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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