The results at E. Bon Holdings Limited (HKG:599) have been quite disappointing recently and CEO Tony Tse bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 08 September 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.
How Does Total Compensation For Tony Tse Compare With Other Companies In The Industry?
Our data indicates that E. Bon Holdings Limited has a market capitalization of HK$240m, and total annual CEO compensation was reported as HK$3.1m for the year to March 2021. That's a notable decrease of 16% on last year. In particular, the salary of HK$3.01m, makes up a huge portion of the total compensation being paid to the CEO.
For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.5m. This suggests that E. Bon Holdings remunerates its CEO largely in line with the industry average.
Talking in terms of the industry, salary represented approximately 85% of total compensation out of all the companies we analyzed, while other remuneration made up 15% of the pie. E. Bon Holdings has gone down a largely traditional route, paying Tony Tse a high salary, giving it preference over non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
A Look at E. Bon Holdings Limited's Growth Numbers
E. Bon Holdings Limited has reduced its earnings per share by 38% a year over the last three years. It saw its revenue drop 17% over the last year.
The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has E. Bon Holdings Limited Been A Good Investment?
Since shareholders would have lost about 16% over three years, some E. Bon Holdings Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
E. Bon Holdings pays its CEO a majority of compensation through a salary. 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.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for E. Bon Holdings (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.
Important note: E. Bon Holdings 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.
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