We Discuss Why Somerley Capital Holdings Limited's (HKG:8439) CEO Compensation May Be Closely Reviewed

Key Insights

• Somerley Capital Holdings will host its Annual General Meeting on 10th of September
• Salary of HK$3.18m is part of CEO Kenneth Chow's total remuneration
• The total compensation is 67% higher than the average for the industry
• Somerley Capital Holdings' three-year loss to shareholders was 57% while its EPS was down 58% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at Somerley Capital Holdings Limited (HKG:8439) recently. At the upcoming AGM on 10th of September, shareholders can hear from the board including their plans for turning around performance. 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. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for Somerley Capital Holdings

How Does Total Compensation For Kenneth Chow Compare With Other Companies In The Industry?

According to our data, Somerley Capital Holdings Limited has a market capitalization of HK$88m, and paid its CEO total annual compensation worth HK$3.2m over the year to March 2024. That's mostly flat as compared to the prior year's compensation. Notably, the salary which is HK$3.18m, represents most of the total compensation being paid.

For comparison, other companies in the Hong Kong Capital Markets industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.9m. This suggests that Kenneth Chow is paid more than the median for the industry. Furthermore, Kenneth Chow directly owns HK$3.4m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	HK$3.2m	HK$3.2m	98%
Other	HK$66k	HK$18k	2%
Total Compensation	HK$3.2m	HK$3.2m	100%

On an industry level, around 84% of total compensation represents salary and 16% is other remuneration. Investors will find it interesting that Somerley Capital Holdings pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Somerley Capital Holdings Limited's Growth

Somerley Capital Holdings Limited has reduced its earnings per share by 58% a year over the last three years. Its revenue is up 12% over the last year.

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. 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 Somerley Capital Holdings Limited Been A Good Investment?

Few Somerley Capital Holdings 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...

Kenneth receives almost all of their compensation through a salary. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Somerley Capital Holdings you should be aware of, and 1 of them shouldn't be ignored.

Important note: Somerley Capital Holdings 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.