We Think South China Financial Holdings Limited's (HKG:619) CEO Compensation Package Needs To Be Put Under A Microscope

South China Financial Holdings Limited (HKG:619) has not performed well recently and CEO Jessica Ng will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 22 June 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for South China Financial Holdings

Comparing South China Financial Holdings Limited's CEO Compensation With the industry

According to our data, South China Financial Holdings Limited has a market capitalization of HK$113m, and paid its CEO total annual compensation worth HK$2.1m over the year to December 2020. We note that's a decrease of 13% compared to last year. We note that the salary portion, which stands at HK$2.08m 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 HK$1.9m. So it looks like South China Financial Holdings compensates Jessica Ng in line with the median for the industry.

Component	2020	2019	Proportion (2020)
Salary	HK$2.1m	HK$2.4m	99%
Other	HK$28k	HK$28k	1%
Total Compensation	HK$2.1m	HK$2.4m	100%

Speaking on an industry level, nearly 84% of total compensation represents salary, while the remainder of 16% is other remuneration. Investors will find it interesting that South China Financial Holdings pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at South China Financial Holdings Limited's Growth Numbers

Over the last three years, South China Financial Holdings Limited has shrunk its earnings per share by 61% per year. In the last year, its revenue is down 59%.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has South China Financial Holdings Limited Been A Good Investment?

The return of -79% over three years would not have pleased South China Financial Holdings Limited shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Jessica receives almost all of their compensation through a salary. 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.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 3 warning signs for South China Financial Holdings you should be aware of, and 1 of them is concerning.

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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