Here's Why Shareholders Should Examine Gemilang International Limited's (HKG:6163) CEO Compensation Package More Closely

Shareholders will probably not be too impressed with the underwhelming results at Gemilang International Limited (HKG:6163) recently. At the upcoming AGM on 26 March 2021, 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. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Gemilang International

How Does Total Compensation For Chong Yong Pang Compare With Other Companies In The Industry?

At the time of writing, our data shows that Gemilang International Limited has a market capitalization of HK$221m, and reported total annual CEO compensation of US$492k for the year to October 2020. Notably, that's an increase of 17% over the year before. We note that the salary portion, which stands at US$420.0k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of US$163k. This suggests that Chong Yong Pang is paid more than the median for the industry. Furthermore, Chong Yong Pang directly owns HK$72m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	US$420k	US$362k	85%
Other	US$72k	US$59k	15%
Total Compensation	US$492k	US$421k	100%

On an industry level, roughly 86% of total compensation represents salary and 14% is other remuneration. Although there is a difference in how total compensation is set, Gemilang International more or less reflects the market in terms of setting the salary. 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.

Gemilang International Limited's Growth

Over the last three years, Gemilang International Limited has shrunk its earnings per share by 30% per year. It saw its revenue drop 51% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Gemilang International Limited Been A Good Investment?

Few Gemilang International Limited shareholders would feel satisfied with the return of -67% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid 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, the board will get the chance to explain the steps it plans to take to improve business performance.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 5 warning signs for Gemilang International you should be aware of, and 2 of them are concerning.

Important note: Gemilang International 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. 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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