We Think Capital Finance Holdings Limited's (HKG:8239) CEO Compensation Package Needs To Be Put Under A Microscope

The results at Capital Finance Holdings Limited (HKG:8239) have been quite disappointing recently and CEO Wei Zhang 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 25 June 2021. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for Capital Finance Holdings

How Does Total Compensation For Wei Zhang Compare With Other Companies In The Industry?

According to our data, Capital Finance Holdings Limited has a market capitalization of HK$127m, and paid its CEO total annual compensation worth HK$3.5m over the year to December 2020. That is, the compensation was roughly the same as last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$1.4m.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$739k. Accordingly, our analysis reveals that Capital Finance Holdings Limited pays Wei Zhang north of the industry median. What's more, Wei Zhang holds HK$10m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	HK$1.4m	HK$1.6m	39%
Other	HK$2.2m	HK$2.0m	61%
Total Compensation	HK$3.5m	HK$3.5m	100%

Talking in terms of the industry, salary represented approximately 70% of total compensation out of all the companies we analyzed, while other remuneration made up 30% of the pie. Capital Finance Holdings pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Capital Finance Holdings Limited's Growth Numbers

Capital Finance Holdings Limited has reduced its earnings per share by 41% a year over the last three years. It saw its revenue drop 30% over the last year.

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. 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 Capital Finance Holdings Limited Been A Good Investment?

With a total shareholder return of -52% over three years, Capital Finance Holdings Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Capital Finance Holdings (1 can't be ignored!) that you should be aware of before investing here.

Switching gears from Capital Finance Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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