Here's Why Shanghai Gench Education Group Limited's (HKG:1525) CEO Compensation Is The Least Of Shareholders Concerns

Key Insights

• Shanghai Gench Education Group to hold its Annual General Meeting on 30th of May
• Salary of CN¥900.0k is part of CEO Xiangzhan Zheng's total remuneration
• The overall pay is 61% below the industry average
• Shanghai Gench Education Group's three-year loss to shareholders was 35% while its EPS grew by 15% over the past three years

Performance at Shanghai Gench Education Group Limited (HKG:1525) has been rather uninspiring recently and shareholders may be wondering how CEO Xiangzhan Zheng plans to fix this. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 30th of May. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. In our opinion, CEO compensation does not look excessive and we discuss why.

View our latest analysis for Shanghai Gench Education Group

Comparing Shanghai Gench Education Group Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Shanghai Gench Education Group Limited has a market capitalization of HK$1.3b, and reported total annual CEO compensation of CN¥1.1m for the year to December 2023. There was no change in the compensation compared to last year. Notably, the salary which is CN¥900.0k, represents most of the total compensation being paid.

On comparing similar companies from the Hong Kong Consumer Services industry with market caps ranging from HK$781m to HK$3.1b, we found that the median CEO total compensation was CN¥2.8m. In other words, Shanghai Gench Education Group pays its CEO lower than the industry median. Furthermore, Xiangzhan Zheng directly owns HK$103m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	CN¥900k	CN¥900k	82%
Other	CN¥200k	CN¥200k	18%
Total Compensation	CN¥1.1m	CN¥1.1m	100%

Speaking on an industry level, nearly 85% of total compensation represents salary, while the remainder of 15% is other remuneration. Our data reveals that Shanghai Gench Education Group allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Shanghai Gench Education Group Limited's Growth

Over the past three years, Shanghai Gench Education Group Limited has seen its earnings per share (EPS) grow by 15% per year. It achieved revenue growth of 18% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. 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 Shanghai Gench Education Group Limited Been A Good Investment?

With a total shareholder return of -35% over three years, Shanghai Gench Education Group Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The fact that shareholders are sitting on a loss is certainly disheartening. This contrasts to the strong EPS growth recently however, and suggests that there may be other factors at play driving down the share price. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board’s judgement and decision-making is aligned with their expectations.

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 1 warning sign for Shanghai Gench Education Group that investors should think about before committing capital to this stock.

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.