Shareholders May Not Be So Generous With Crocodile Garments Limited's (HKG:122) CEO Compensation And Here's Why

Key Insights

• Crocodile Garments to hold its Annual General Meeting on 13th of December
• Salary of HK$3.84m is part of CEO Vanessa Lam's total remuneration
• Total compensation is 72% above industry average
• Crocodile Garments' three-year loss to shareholders was 50% while its EPS grew by 30% over the past three years

The underwhelming share price performance of Crocodile Garments Limited (HKG:122) in the past three years would have disappointed many shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 13th of December could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. 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 Crocodile Garments

How Does Total Compensation For Vanessa Lam Compare With Other Companies In The Industry?

According to our data, Crocodile Garments Limited has a market capitalization of HK$196m, and paid its CEO total annual compensation worth HK$4.2m over the year to July 2023. That's a notable increase of 20% on last year. In particular, the salary of HK$3.84m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Hong Kong Luxury industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$2.4m. This suggests that Vanessa Lam is paid more than the median for the industry. Moreover, Vanessa Lam also holds HK$3.7m worth of Crocodile Garments stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	HK$3.8m	HK$3.4m	91%
Other	HK$359k	HK$78k	9%
Total Compensation	HK$4.2m	HK$3.5m	100%

On an industry level, around 89% of total compensation represents salary and 11% is other remuneration. Although there is a difference in how total compensation is set, Crocodile Garments more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Crocodile Garments Limited's Growth

Crocodile Garments Limited has seen its earnings per share (EPS) increase by 30% a year over the past three years. It saw its revenue drop 16% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 Crocodile Garments Limited Been A Good Investment?

The return of -50% over three years would not have pleased Crocodile Garments Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

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 probably be keen to find out what are the other factors could be weighing down the stock. 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 pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 2 warning signs for Crocodile Garments (of which 1 shouldn't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Crocodile Garments, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.