Should Shareholders Reconsider Shenguan Holdings (Group) Limited's (HKG:829) CEO Compensation Package?

Key Insights

• Shenguan Holdings (Group) will host its Annual General Meeting on 3rd of June
• Salary of CN¥3.75m is part of CEO Yaxian Zhou's total remuneration
• The overall pay is 253% above the industry average
• Shenguan Holdings (Group)'s three-year loss to shareholders was 6.6% while its EPS was down 30% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at Shenguan Holdings (Group) Limited (HKG:829) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 3rd of June. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for Shenguan Holdings (Group)

Comparing Shenguan Holdings (Group) Limited's CEO Compensation With The Industry

Our data indicates that Shenguan Holdings (Group) Limited has a market capitalization of HK$1.0b, and total annual CEO compensation was reported as CN¥4.3m for the year to December 2023. That's just a smallish increase of 4.1% on last year. In particular, the salary of CN¥3.75m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the Hong Kong Food industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of CN¥1.2m. Accordingly, our analysis reveals that Shenguan Holdings (Group) Limited pays Yaxian Zhou north of the industry median. Moreover, Yaxian Zhou also holds HK$101m worth of Shenguan Holdings (Group) stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	CN¥3.8m	CN¥3.7m	87%
Other	CN¥585k	CN¥433k	13%
Total Compensation	CN¥4.3m	CN¥4.2m	100%

Talking in terms of the industry, salary represented approximately 74% of total compensation out of all the companies we analyzed, while other remuneration made up 26% of the pie. Shenguan Holdings (Group) pays out 87% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Shenguan Holdings (Group) Limited's Growth

Shenguan Holdings (Group) Limited has reduced its earnings per share by 30% a year over the last three years. It achieved revenue growth of 7.6% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Shenguan Holdings (Group) Limited Been A Good Investment?

Given the total shareholder loss of 6.6% over three years, many shareholders in Shenguan Holdings (Group) Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which is significant) in Shenguan Holdings (Group) we think you should know about.

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. 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.