We Think China Zheshang Bank Co., Ltd's (HKG:2016) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• China Zheshang Bank to hold its Annual General Meeting on 12th of June
• Salary of CN¥1.20m is part of CEO Rongsen Zhang's total remuneration
• The overall pay is comparable to the industry average
• China Zheshang Bank's EPS declined by 0.8% over the past three years while total shareholder loss over the past three years was 32%

The results at China Zheshang Bank Co., Ltd (HKG:2016) have been quite disappointing recently and CEO Rongsen Zhang bears some responsibility for this. At the upcoming AGM on 12th of June, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for China Zheshang Bank

How Does Total Compensation For Rongsen Zhang Compare With Other Companies In The Industry?

Our data indicates that China Zheshang Bank Co., Ltd has a market capitalization of HK$81b, and total annual CEO compensation was reported as CN¥2.3m for the year to December 2023. This means that the compensation hasn't changed much from last year. Notably, the salary which is CN¥1.20m, represents a considerable chunk of the total compensation being paid.

In comparison with other companies in the Hong Kong Banks industry with market capitalizations over HK$62b, the reported median total CEO compensation was CN¥2.4m. This suggests that China Zheshang Bank remunerates its CEO largely in line with the industry average. Moreover, Rongsen Zhang also holds HK$3.9m worth of China Zheshang Bank stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	CN¥1.2m	CN¥1.2m	53%
Other	CN¥1.1m	CN¥1.0m	47%
Total Compensation	CN¥2.3m	CN¥2.2m	100%

On an industry level, roughly 60% of total compensation represents salary and 40% is other remuneration. It's interesting to note that China Zheshang Bank allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

China Zheshang Bank Co., Ltd's Growth

Earnings per share at China Zheshang Bank Co., Ltd are much the same as they were three years ago, albeit slightly lower. In the last year, its revenue is up 9.5%.

The lack of EPS growth is certainly uninspiring. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has China Zheshang Bank Co., Ltd Been A Good Investment?

The return of -32% over three years would not have pleased China Zheshang Bank Co., Ltd shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for China Zheshang Bank that investors should be aware of in a dynamic business environment.

Switching gears from China Zheshang 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.