We Think Hanhua Financial Holding Co., Ltd.'s (HKG:3903) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• Hanhua Financial Holding's Annual General Meeting to take place on 29th of May
• CEO Weilan Cui's total compensation includes salary of CN¥1.70m
• The total compensation is similar to the average for the industry
• Over the past three years, Hanhua Financial Holding's EPS fell by 40% and over the past three years, the total loss to shareholders 5.4%

The results at Hanhua Financial Holding Co., Ltd. (HKG:3903) have been quite disappointing recently and CEO Weilan Cui 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 29th of May. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Hanhua Financial Holding

Comparing Hanhua Financial Holding Co., Ltd.'s CEO Compensation With The Industry

Our data indicates that Hanhua Financial Holding Co., Ltd. has a market capitalization of HK$1.5b, and total annual CEO compensation was reported as CN¥1.7m for the year to December 2023. Notably, that's a decrease of 35% over the year before. Notably, the salary of CN¥1.7m is the entirety of the CEO compensation.

For comparison, other companies in the Hong Kong Diversified Financial industry with market capitalizations ranging between HK$781m and HK$3.1b had a median total CEO compensation of CN¥1.9m. From this we gather that Weilan Cui is paid around the median for CEOs in the industry. What's more, Weilan Cui holds HK$893k worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	CN¥1.7m	CN¥2.0m	100%
Other	-	CN¥652k	-
Total Compensation	CN¥1.7m	CN¥2.6m	100%

On an industry level, roughly 66% of total compensation represents salary and 34% is other remuneration. Speaking on a company level, Hanhua Financial Holding prefers to tread along a traditional path, disbursing all compensation through a salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Hanhua Financial Holding Co., Ltd.'s Growth Numbers

Over the last three years, Hanhua Financial Holding Co., Ltd. has shrunk its earnings per share by 40% per year. In the last year, its revenue is down 6.5%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Hanhua Financial Holding Co., Ltd. Been A Good Investment?

Given the total shareholder loss of 5.4% over three years, many shareholders in Hanhua Financial Holding Co., Ltd. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Hanhua Financial Holding rewards its CEO solely through a salary, ignoring non-salary benefits completely. 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 1 which is concerning) in Hanhua Financial Holding we think you should know about.

Important note: Hanhua Financial Holding 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.