This Is Why Shareholders May Want To Hold Back On A Pay Rise For FY Financial (Shenzhen) Co., Ltd.'s (HKG:8452) CEO

By
Simply Wall St
Published
May 05, 2021
SEHK:8452

The underwhelming performance at FY Financial (Shenzhen) Co., Ltd. (HKG:8452) recently has probably not pleased shareholders. The next AGM coming up on 12 May 2021 will be a chance for shareholders to have their concerns addressed by the board, challenge management on company strategy and vote on resolutions such as executive remuneration, which may help change the company's future prospects. We think most shareholders will probably pass the CEO compensation, based on what we gathered.

Check out our latest analysis for FY Financial (Shenzhen)

How Does Total Compensation For Peng Li Compare With Other Companies In The Industry?

At the time of writing, our data shows that FY Financial (Shenzhen) Co., Ltd. has a market capitalization of HK$160m, and reported total annual CEO compensation of CN¥469k for the year to December 2020. That's a notable decrease of 30% on last year. In particular, the salary of CN¥432.2k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of CN¥1.9m. In other words, FY Financial (Shenzhen) pays its CEO lower than the industry median.

Component20202019Proportion (2020)
Salary CN¥432k CN¥432k 92%
Other CN¥37k CN¥236k 8%
Total CompensationCN¥469k CN¥668k100%

On an industry level, around 74% of total compensation represents salary and 26% is other remuneration. FY Financial (Shenzhen) is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
SEHK:8452 CEO Compensation May 5th 2021

FY Financial (Shenzhen) Co., Ltd.'s Growth

Over the last three years, FY Financial (Shenzhen) Co., Ltd. has shrunk its earnings per share by 48% per year. In the last year, its revenue is down 45%.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has FY Financial (Shenzhen) Co., Ltd. Been A Good Investment?

The return of -59% over three years would not have pleased FY Financial (Shenzhen) Co., Ltd. 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for FY Financial (Shenzhen) that investors should look into moving forward.

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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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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