We Discuss Why Tianyun International Holdings Limited's (HKG:6836) CEO Compensation May Be Closely Reviewed

Shareholders will probably not be too impressed with the underwhelming results at Tianyun International Holdings Limited (HKG:6836) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 01 December 2022. 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. We present the case why we think CEO compensation is out of sync with company performance.

Our analysis indicates that 6836 is potentially undervalued!

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

At the time of writing, our data shows that Tianyun International Holdings Limited has a market capitalization of HK$889m, and reported total annual CEO compensation of CN¥1.3m for the year to December 2021. That's a notable decrease of 30% on last year. In particular, the salary of CN¥1.03m, makes up a huge portion of the total compensation being paid to 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 CN¥1.3m. So it looks like Tianyun International Holdings compensates Ziyuan Yang in line with the median for the industry. What's more, Ziyuan Yang holds HK$178m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	CN¥1.0m	CN¥1.8m	77%
Other	CN¥313k	CN¥174k	23%
Total Compensation	CN¥1.3m	CN¥1.9m	100%

Talking in terms of the industry, salary represented approximately 72% of total compensation out of all the companies we analyzed, while other remuneration made up 28% of the pie. Although there is a difference in how total compensation is set, Tianyun International Holdings more or less reflects the market in terms of setting the salary. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Tianyun International Holdings Limited's Growth

Over the last three years, Tianyun International Holdings Limited has shrunk its earnings per share by 7.1% per year. Its revenue is down 15% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Tianyun International Holdings Limited Been A Good Investment?

Given the total shareholder loss of 1.2% over three years, many shareholders in Tianyun International Holdings Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

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, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Tianyun International Holdings that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.