Increases to CEO Compensation Might Be Put On Hold For Now at The Bank of East Asia, Limited (HKG:23)

Key Insights

• Bank of East Asia's Annual General Meeting to take place on 10th of May
• Total pay for CEO Adrian David Li includes HK$8.00m salary
• Total compensation is 866% above industry average
• Over the past three years, Bank of East Asia's EPS grew by 11% and over the past three years, the total loss to shareholders 22%

Shareholders of The Bank of East Asia, Limited (HKG:23) will have been dismayed by the negative share price return over the last three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 10th of May could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Bank of East Asia

Comparing The Bank of East Asia, Limited's CEO Compensation With The Industry

At the time of writing, our data shows that The Bank of East Asia, Limited has a market capitalization of HK$27b, and reported total annual CEO compensation of HK$21m for the year to December 2023. That's a fairly small increase of 7.0% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$8.0m.

On examining similar-sized companies in the Hong Kong Banks industry with market capitalizations between HK$16b and HK$50b, we discovered that the median CEO total compensation of that group was HK$2.2m. This suggests that Adrian David Li is paid more than the median for the industry. Furthermore, Adrian David Li directly owns HK$40m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	HK$8.0m	HK$7.7m	37%
Other	HK$13m	HK$12m	63%
Total Compensation	HK$21m	HK$20m	100%

Talking in terms of the industry, salary represented approximately 63% of total compensation out of all the companies we analyzed, while other remuneration made up 37% of the pie. In Bank of East Asia's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

The Bank of East Asia, Limited's Growth

The Bank of East Asia, Limited has seen its earnings per share (EPS) increase by 11% a year over the past three years. Its revenue is up 7.8% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. 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 The Bank of East Asia, Limited Been A Good Investment?

Given the total shareholder loss of 22% over three years, many shareholders in The Bank of East Asia, Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with 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. We did our research and spotted 1 warning sign for Bank of East Asia that investors should look into moving forward.

Important note: Bank of East Asia is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.