Here's Why Shareholders May Want To Be Cautious With Increasing ECI Technology Holdings Limited's (HKG:8013) CEO Pay Packet

Shareholders of ECI Technology Holdings Limited (HKG:8013) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 19 January 2022 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for ECI Technology Holdings

How Does Total Compensation For Tai Wing Ng Compare With Other Companies In The Industry?

According to our data, ECI Technology Holdings Limited has a market capitalization of HK$112m, and paid its CEO total annual compensation worth HK$1.4m over the year to August 2021. There was no change in the compensation compared to last year. Notably, the salary which is HK$1.32m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.5m. This suggests that ECI Technology Holdings remunerates its CEO largely in line with the industry average. Furthermore, Tai Wing Ng directly owns HK$62m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	HK$1.3m	HK$1.3m	98%
Other	HK$30k	HK$30k	2%
Total Compensation	HK$1.4m	HK$1.4m	100%

Talking in terms of the industry, salary represented approximately 90% of total compensation out of all the companies we analyzed, while other remuneration made up 10% of the pie. ECI Technology Holdings has gone down a largely traditional route, paying Tai Wing Ng a high salary, giving it preference over non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ECI Technology Holdings Limited's Growth

ECI Technology Holdings Limited has seen its earnings per share (EPS) increase by 75% a year over the past three years. Its revenue is up 19% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. 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 ECI Technology Holdings Limited Been A Good Investment?

With a total shareholder return of -63% over three years, ECI Technology Holdings Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Tai Wing receives almost all of their compensation through a salary. The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 4 warning signs for ECI Technology Holdings that you should be aware of before investing.

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. 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.