Here's Why It's Unlikely That Loco Hong Kong Holdings Limited's (HKG:8162) CEO Will See A Pay Rise This Year

The results at Loco Hong Kong Holdings Limited (HKG:8162) have been quite disappointing recently and CEO Wendong Wang 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 17 June 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.

View our latest analysis for Loco Hong Kong Holdings

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

Our data indicates that Loco Hong Kong Holdings Limited has a market capitalization of HK$176m, and total annual CEO compensation was reported as HK$2.6m for the year to December 2020. We note that's a small decrease of 5.3% on last year. Notably, the salary which is HK$1.95m, 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$2.3m. This suggests that Loco Hong Kong Holdings remunerates its CEO largely in line with the industry average.

Component	2020	2019	Proportion (2020)
Salary	HK$2.0m	HK$2.0m	76%
Other	HK$628k	HK$772k	24%
Total Compensation	HK$2.6m	HK$2.7m	100%

On an industry level, roughly 96% of total compensation represents salary and 4% is other remuneration. It's interesting to note that Loco Hong Kong Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Loco Hong Kong Holdings Limited's Growth

Over the last three years, Loco Hong Kong Holdings Limited has shrunk its earnings per share by 20% per year. It saw its revenue drop 90% over the last year.

Few shareholders would be pleased to read that EPS have declined. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Loco Hong Kong Holdings Limited Been A Good Investment?

Few Loco Hong Kong Holdings Limited shareholders would feel satisfied with the return of -34% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 5 warning signs for Loco Hong Kong Holdings you should be aware of, and 1 of them is potentially serious.

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.
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