How Does Melco International Development's (HKG:200) CEO Pay Compare With Company Performance?

This article will reflect on the compensation paid to Lawrence Ho who has served as CEO of Melco International Development Limited (HKG:200) since 2006. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Melco International Development.

See our latest analysis for Melco International Development

How Does Total Compensation For Lawrence Ho Compare With Other Companies In The Industry?

According to our data, Melco International Development Limited has a market capitalization of HK$22b, and paid its CEO total annual compensation worth HK$206m over the year to December 2019. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$28m.

On examining similar-sized companies in the industry with market capitalizations between HK$16b and HK$50b, we discovered that the median CEO total compensation of that group was HK$23m. This suggests that Lawrence Ho is paid more than the median for the industry. Moreover, Lawrence Ho also holds HK$8.5b worth of Melco International Development stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 87% of total compensation represents salary and 13% is other remuneration. Melco International Development pays a modest slice of remuneration through salary, as compared 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 Melco International Development Limited's Growth Numbers

Over the last three years, Melco International Development Limited has shrunk its earnings per share by 78% per year. In the last year, its revenue is down 30%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Melco International Development Limited Been A Good Investment?

With a three year total loss of 27% for the shareholders, Melco International Development Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As previously discussed, Lawrence is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. Add to that declining EPS growth, and you have the perfect recipe for shareholder irritation. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.

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 Melco International Development that you should be aware of before investing.

Important note: Melco International Development 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.

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This article by Simply Wall St is general in nature. 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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