Here's Why Shareholders May Want To Be Cautious With Increasing TCL Electronics Holdings Limited's (HKG:1070) CEO Pay Packet

Key Insights

• TCL Electronics Holdings will host its Annual General Meeting on 20th of May
• Total pay for CEO Shaoyong Zhang includes HK$1.53m salary
• The overall pay is 343% above the industry average
• TCL Electronics Holdings' total shareholder return over the past three years was 34% while its EPS was down 28% over the past three years

The share price of TCL Electronics Holdings Limited (HKG:1070) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 20th of May. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

View our latest analysis for TCL Electronics Holdings

How Does Total Compensation For Shaoyong Zhang Compare With Other Companies In The Industry?

According to our data, TCL Electronics Holdings Limited has a market capitalization of HK$16b, and paid its CEO total annual compensation worth HK$7.0m over the year to December 2023. Notably, that's a decrease of 51% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at HK$1.5m.

For comparison, other companies in the Hong Kong Consumer Durables industry with market capitalizations ranging between HK$7.8b and HK$25b had a median total CEO compensation of HK$1.6m. Accordingly, our analysis reveals that TCL Electronics Holdings Limited pays Shaoyong Zhang north of the industry median.

Component	2023	2022	Proportion (2023)
Salary	HK$1.5m	HK$932k	22%
Other	HK$5.5m	HK$13m	78%
Total Compensation	HK$7.0m	HK$14m	100%

On an industry level, roughly 89% of total compensation represents salary and 11% is other remuneration. TCL Electronics Holdings sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

TCL Electronics Holdings Limited's Growth

Over the last three years, TCL Electronics Holdings Limited has shrunk its earnings per share by 28% per year. It achieved revenue growth of 11% over the last year.

Overall this is not a very positive result for shareholders. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has TCL Electronics Holdings Limited Been A Good Investment?

Boasting a total shareholder return of 34% over three years, TCL Electronics Holdings Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

Whatever your view on compensation, you might want to check if insiders are buying or selling TCL Electronics Holdings shares (free trial).

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.