Shareholders May Be Wary Of Increasing Kingmaker Footwear Holdings Limited's (HKG:1170) CEO Compensation Package

Key Insights

• Kingmaker Footwear Holdings' Annual General Meeting to take place on 28th of August
• CEO Ares Chen's total compensation includes salary of HK$953.0k
• The overall pay is comparable to the industry average
• Kingmaker Footwear Holdings' EPS declined by 39% over the past three years while total shareholder loss over the past three years was 11%

The results at Kingmaker Footwear Holdings Limited (HKG:1170) have been quite disappointing recently and CEO Ares Chen bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28th of August. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Kingmaker Footwear Holdings

How Does Total Compensation For Ares Chen Compare With Other Companies In The Industry?

Our data indicates that Kingmaker Footwear Holdings Limited has a market capitalization of HK$470m, and total annual CEO compensation was reported as HK$1.4m for the year to March 2024. That's a slight decrease of 5.7% on the prior year. In particular, the salary of HK$953.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Hong Kong Luxury industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$1.9m. So it looks like Kingmaker Footwear Holdings compensates Ares Chen in line with the median for the industry. Furthermore, Ares Chen directly owns HK$8.7m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	HK$953k	HK$1.0m	66%
Other	HK$491k	HK$500k	34%
Total Compensation	HK$1.4m	HK$1.5m	100%

Speaking on an industry level, nearly 91% of total compensation represents salary, while the remainder of 9% is other remuneration. It's interesting to note that Kingmaker Footwear Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. 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.

Kingmaker Footwear Holdings Limited's Growth

Over the last three years, Kingmaker Footwear Holdings Limited has shrunk its earnings per share by 39% per year. It saw its revenue drop 35% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Kingmaker Footwear Holdings Limited Been A Good Investment?

Given the total shareholder loss of 11% over three years, many shareholders in Kingmaker Footwear Holdings Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Kingmaker Footwear Holdings that investors should think about before committing capital to this stock.

Important note: Kingmaker Footwear Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.