How Much Is Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) Paying Its CEO?

This article will reflect on the compensation paid to Andrew Yao who has served as CEO of Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) since 2015. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Hong Kong Shanghai Alliance Holdings

Comparing Hong Kong Shanghai Alliance Holdings Limited's CEO Compensation With the industry

At the time of writing, our data shows that Hong Kong Shanghai Alliance Holdings Limited has a market capitalization of HK$158m, and reported total annual CEO compensation of HK$7.4m for the year to March 2020. We note that's a decrease of 31% compared to last year. Notably, the salary which is HK$5.45m, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.4m. Hence, we can conclude that Andrew Yao is remunerated higher than the industry median. Furthermore, Andrew Yao directly owns HK$23m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, around 92% of total compensation represents salary and 7.7% is other remuneration. In Hong Kong Shanghai Alliance Holdings' case, non-salary compensation represents a greater slice of total remuneration, 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.

Hong Kong Shanghai Alliance Holdings Limited's Growth

Over the last three years, Hong Kong Shanghai Alliance Holdings Limited has shrunk its earnings per share by 38% per year. Its revenue is down 19% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Hong Kong Shanghai Alliance Holdings Limited Been A Good Investment?

Given the total shareholder loss of 69% over three years, many shareholders in Hong Kong Shanghai Alliance Holdings Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude...

As we noted earlier, Hong Kong Shanghai Alliance Holdings pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. Arguably worse, we've been waiting for positive EPS growth for the last three years. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Hong Kong Shanghai Alliance Holdings (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.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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