Increases to CEO Compensation Might Be Put On Hold For Now at Li Ning Company Limited (HKG:2331)

Key Insights

• Li Ning will host its Annual General Meeting on 13th of June
• Total pay for CEO Ning Li includes CN¥15.0m salary
• The total compensation is 747% higher than the average for the industry
• Li Ning's EPS grew by 22% over the past three years while total shareholder loss over the past three years was 71%

The underwhelming share price performance of Li Ning Company Limited (HKG:2331) in the past three years would have disappointed many shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 13th of June. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Li Ning

Comparing Li Ning Company Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Li Ning Company Limited has a market capitalization of HK$52b, and reported total annual CEO compensation of CN¥62m for the year to December 2023. We note that's a decrease of 14% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at CN¥15m.

In comparison with other companies in the Hong Kong Luxury industry with market capitalizations ranging from HK$31b to HK$94b, the reported median CEO total compensation was CN¥7.4m. Accordingly, our analysis reveals that Li Ning Company Limited pays Ning Li north of the industry median. Moreover, Ning Li also holds HK$91m worth of Li Ning 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	CN¥15m	CN¥15m	24%
Other	CN¥47m	CN¥58m	76%
Total Compensation	CN¥62m	CN¥73m	100%

Speaking on an industry level, nearly 94% of total compensation represents salary, while the remainder of 6% is other remuneration. In Li Ning's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Li Ning Company Limited's Growth Numbers

Li Ning Company Limited has seen its earnings per share (EPS) increase by 22% a year over the past three years. In the last year, its revenue is up 7.0%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Li Ning Company Limited Been A Good Investment?

Few Li Ning Company Limited shareholders would feel satisfied with the return of -71% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. 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. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

Shareholders may want to check for free if Li Ning insiders are buying or selling shares.

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.