We Discuss Why Shandong International Trust Co., Ltd.'s (HKG:1697) CEO Compensation May Be Closely Reviewed

Key Insights

• Shandong International Trust's Annual General Meeting to take place on 27th of June
• Salary of CN¥1.10m is part of CEO Hao Fang's total remuneration
• The total compensation is similar to the average for the industry
• Shandong International Trust's EPS declined by 37% over the past three years while total shareholder loss over the past three years was 51%

The results at Shandong International Trust Co., Ltd. (HKG:1697) have been quite disappointing recently and CEO Hao Fang 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 27th of June. 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. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Shandong International Trust

Comparing Shandong International Trust Co., Ltd.'s CEO Compensation With The Industry

At the time of writing, our data shows that Shandong International Trust Co., Ltd. has a market capitalization of HK$1.5b, and reported total annual CEO compensation of CN¥1.3m for the year to December 2023. We note that's a decrease of 18% compared to last year. Notably, the salary which is CN¥1.10m, represents most of the total compensation being paid.

For comparison, other companies in the Hong Kong Capital Markets industry with market capitalizations ranging between HK$780m and HK$3.1b had a median total CEO compensation of CN¥1.3m. This suggests that Shandong International Trust remunerates its CEO largely in line with the industry average.

Component	2023	2022	Proportion (2023)
Salary	CN¥1.1m	CN¥969k	84%
Other	CN¥213k	CN¥640k	16%
Total Compensation	CN¥1.3m	CN¥1.6m	100%

On an industry level, around 83% of total compensation represents salary and 17% is other remuneration. Shandong International Trust is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Shandong International Trust Co., Ltd.'s Growth

Over the last three years, Shandong International Trust Co., Ltd. has shrunk its earnings per share by 37% per year. Its revenue is down 4.1% over the previous year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Shandong International Trust Co., Ltd. Been A Good Investment?

With a total shareholder return of -51% over three years, Shandong International Trust Co., Ltd. shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

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, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Shandong International Trust (2 can't be ignored!) that you should be aware of before investing here.

Important note: Shandong International Trust 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com