We Think Shenwan Hongyuan (H.K.) Limited's (HKG:218) CEO Compensation Package Needs To Be Put Under A Microscope

Shenwan Hongyuan (H.K.) Limited (HKG:218) has not performed well recently and CEO Yizhou Qiu will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 21 May 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for Shenwan Hongyuan (H.K.)

How Does Total Compensation For Yizhou Qiu Compare With Other Companies In The Industry?

Our data indicates that Shenwan Hongyuan (H.K.) Limited has a market capitalization of HK$1.5b, and total annual CEO compensation was reported as HK$3.0m for the year to December 2020. Notably, that's a decrease of 45% over the year before. Notably, the salary of HK$3.0m is the entirety of the CEO compensation.

For comparison, other companies in the same industry with market capitalizations ranging between HK$777m and HK$3.1b had a median total CEO compensation of HK$1.8m. Hence, we can conclude that Yizhou Qiu is remunerated higher than the industry median.

Component	2020	2019	Proportion (2020)
Salary	HK$3.0m	HK$5.5m	100%
Other	-	-	-
Total Compensation	HK$3.0m	HK$5.5m	100%

Talking in terms of the industry, salary represented approximately 85% of total compensation out of all the companies we analyzed, while other remuneration made up 15% of the pie. On a company level, Shenwan Hongyuan (H.K.) prefers to reward its CEO through a salary, opting not to pay Yizhou Qiu through non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Shenwan Hongyuan (H.K.) Limited's Growth

Over the last three years, Shenwan Hongyuan (H.K.) Limited has shrunk its earnings per share by 4.9% per year. In the last year, its revenue is up 10%.

The decline in EPS is a bit concerning. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Shenwan Hongyuan (H.K.) Limited Been A Good Investment?

Few Shenwan Hongyuan (H.K.) Limited shareholders would feel satisfied with the return of -57% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Shenwan Hongyuan (H.K.) pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a 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 pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 3 warning signs (and 1 which is a bit concerning) in Shenwan Hongyuan (H.K.) we think you should know about.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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