We Discuss Why Zuoli Kechuang Micro-finance Company Limited's (HKG:6866) CEO Compensation May Be Closely Reviewed

The results at Zuoli Kechuang Micro-finance Company Limited (HKG:6866) have been quite disappointing recently and CEO Sheng Yang bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 29 June 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.

See our latest analysis for Zuoli Kechuang Micro-finance

How Does Total Compensation For Sheng Yang Compare With Other Companies In The Industry?

According to our data, Zuoli Kechuang Micro-finance Company Limited has a market capitalization of HK$472m, and paid its CEO total annual compensation worth CN¥657k over the year to December 2020. We note that's an increase of 22% above last year. We note that the salary portion, which stands at CN¥519.0k constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was CN¥610k. This suggests that Zuoli Kechuang Micro-finance remunerates its CEO largely in line with the industry average.

Speaking on an industry level, nearly 79% of total compensation represents salary, while the remainder of 21% is other remuneration. There isn't a significant difference between Zuoli Kechuang Micro-finance and the broader market, in terms of salary allocation in the overall compensation package. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Zuoli Kechuang Micro-finance Company Limited's Growth Numbers

Over the last three years, Zuoli Kechuang Micro-finance Company Limited has shrunk its earnings per share by 11% per year. Its revenue is down 15% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Zuoli Kechuang Micro-finance Company Limited Been A Good Investment?

With a three year total loss of 24% for the shareholders, Zuoli Kechuang Micro-finance Company Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

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 compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 2 warning signs (and 1 which shouldn't be ignored) in Zuoli Kechuang Micro-finance we think you should know about.

Important note: Zuoli Kechuang Micro-finance 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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