Here's Why LUZHENG FUTURES Company Limited's (HKG:1461) CEO Compensation Is The Least Of Shareholders Concerns

Performance at LUZHENG FUTURES Company Limited (HKG:1461) has been rather uninspiring recently and shareholders may be wondering how CEO Qingbin Liu plans to fix this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 17 June 2021. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. In our opinion, CEO compensation does not look excessive and we discuss why.

View our latest analysis for LUZHENG FUTURES

Comparing LUZHENG FUTURES Company Limited's CEO Compensation With the industry

Our data indicates that LUZHENG FUTURES Company Limited has a market capitalization of HK$541m, and total annual CEO compensation was reported as CN¥988k for the year to December 2020. Notably, that's a decrease of 19% over the year before. We note that the salary portion, which stands at CN¥899.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was CN¥1.6m. That is to say, Qingbin Liu is paid under the industry median.

Component	2020	2019	Proportion (2020)
Salary	CN¥899k	CN¥1.2m	91%
Other	CN¥89k	CN¥51k	9%
Total Compensation	CN¥988k	CN¥1.2m	100%

Speaking on an industry level, nearly 84% of total compensation represents salary, while the remainder of 16% is other remuneration. Our data reveals that LUZHENG FUTURES allocates salary more or less in line with the wider market. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

LUZHENG FUTURES Company Limited's Growth

LUZHENG FUTURES Company Limited has reduced its earnings per share by 29% a year over the last three years. In the last year, its revenue is up 27%.

The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has LUZHENG FUTURES Company Limited Been A Good Investment?

With a total shareholder return of -51% over three years, LUZHENG FUTURES Company Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The fact that shareholders are sitting on a loss is certainly disheartening. The downward trend in share price performance may be attributable to the the fact that earnings growth has gone backwards. In the upcoming AGM, shareholders will get the opportunity to discuss these concerns with the board and assess if the board's plan is likely to improve company performance.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 1 which is potentially serious) in LUZHENG FUTURES we think you should know about.

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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