The results at YGM Trading Limited (HKG:375) have been quite disappointing recently and CEO William Fu bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 17 September 2021. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.
How Does Total Compensation For William Fu Compare With Other Companies In The Industry?
At the time of writing, our data shows that YGM Trading Limited has a market capitalization of HK$362m, and reported total annual CEO compensation of HK$1.9m for the year to March 2021. That's a notable decrease of 17% on last year. We note that the salary portion, which stands at HK$1.68m constitutes the majority of total compensation received by the CEO.
For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.3m. From this we gather that William Fu is paid around the median for CEOs in the industry. Moreover, William Fu also holds HK$4.5m worth of YGM Trading stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, around 91% of total compensation represents salary and 9% is other remuneration. There isn't a significant difference between YGM Trading and the broader market, in terms of salary allocation in the overall compensation package. 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.
A Look at YGM Trading Limited's Growth Numbers
YGM Trading Limited has reduced its earnings per share by 98% a year over the last three years. It saw its revenue drop 20% over the last year.
The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 YGM Trading Limited Been A Good Investment?
Few YGM Trading Limited shareholders would feel satisfied with the return of -65% over three years. So shareholders would probably want the company to be less generous with CEO compensation.
Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO 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.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for YGM Trading that investors should be aware of in a dynamic business environment.
Switching gears from YGM Trading, 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.
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