Should Shareholders Reconsider Guangzhou Rural Commercial Bank Co., Ltd.'s (HKG:1551) CEO Compensation Package?

Simply Wall St
June 01, 2021
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Guangzhou Rural Commercial Bank Co., Ltd. (HKG:1551) has not performed well recently and CEO Xuefei Yi will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 08 June 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Guangzhou Rural Commercial Bank

How Does Total Compensation For Xuefei Yi Compare With Other Companies In The Industry?

At the time of writing, our data shows that Guangzhou Rural Commercial Bank Co., Ltd. has a market capitalization of HK$31b, and reported total annual CEO compensation of CN¥1.4m for the year to December 2020. This means that the compensation hasn't changed much from last year. Notably, the salary which is CN¥1.15m, represents most of the total compensation being paid.

For comparison, other companies in the same industry with market capitalizations ranging between HK$16b and HK$50b had a median total CEO compensation of CN¥1.7m. This suggests that Guangzhou Rural Commercial Bank remunerates its CEO largely in line with the industry average. What's more, Xuefei Yi holds HK$1.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary CN¥1.1m CN¥1.1m 83%
Other CN¥227k CN¥251k 17%
Total CompensationCN¥1.4m CN¥1.4m100%

Talking in terms of the industry, salary represented approximately 56% of total compensation out of all the companies we analyzed, while other remuneration made up 44% of the pie. Guangzhou Rural Commercial Bank pays out 83% 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.

SEHK:1551 CEO Compensation June 1st 2021

A Look at Guangzhou Rural Commercial Bank Co., Ltd.'s Growth Numbers

Over the last three years, Guangzhou Rural Commercial Bank Co., Ltd. has shrunk its earnings per share by 11% per year. Its revenue is down 19% over the previous year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Guangzhou Rural Commercial Bank Co., Ltd. Been A Good Investment?

Given the total shareholder loss of 29% over three years, many shareholders in Guangzhou Rural Commercial Bank Co., Ltd. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Guangzhou Rural Commercial Bank that investors should think about before committing capital to this stock.

Switching gears from Guangzhou Rural Commercial Bank, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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