In 2016, Haining Chen was appointed CEO of Chinese Energy Holdings Limited (HKG:8009). First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Haining Chen's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Chinese Energy Holdings Limited has a market cap of HK$15m, and reported total annual CEO compensation of HK$960k for the year to March 2019. It is worth noting that the CEO compensation consists almost entirely of the salary, worth HK$960k. We looked at a group of companies with market capitalizations under HK$1.6b, and the median CEO total compensation was HK$1.7m.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Chinese Energy Holdings. Talking in terms of the sector, salary represented approximately 83% of total compensation out of all the companies we analysed, while other remuneration made up 17% of the pie. At the company level, Chinese Energy Holdings pays Haining Chen solely through a salary, preferring to go down a conventional route.
At first glance this seems like a real positive for shareholders, since Haining Chen is paid less than the average total compensation paid by similar sized companies. However, before we heap on the praise, we should delve deeper to understand business performance. You can see, below, how CEO compensation at Chinese Energy Holdings has changed over time.
Is Chinese Energy Holdings Limited Growing?
On average over the last three years, Chinese Energy Holdings Limited has seen earnings per share (EPS) move in a favourable direction by 141% each year (using a line of best fit). It saw its revenue drop 37% over the last year.
This demonstrates that the company has been improving recently. A good result. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Chinese Energy Holdings Limited Been A Good Investment?
Given the total loss of 93% over three years, many shareholders in Chinese Energy Holdings Limited are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
It looks like Chinese Energy Holdings Limited pays its CEO less than similar sized companies.
Considering the underlying business is growing earnings, this would suggest the pay is modest. Despite some positives, it is likely that shareholders wanted better returns, given the performance over the last three years. So while we would not say that Haining Chen is generously paid, it would be good to see an improvement in business performance before too an increase in pay. When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. Taking a breather from CEO compensation, we've spotted 2 warning signs for Chinese Energy Holdings (of which 1 doesn't sit too well with us!) you should know about in order to have a holistic understanding of the stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity 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. Thank you for reading.