Here's Why We Think Sisram Medical Ltd's (HKG:1696) CEO Compensation Looks Fair

The performance at Sisram Medical Ltd (HKG:1696) has been rather lacklustre of late and shareholders may be wondering what CEO Lior Dayan is planning to do about this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 30 June 2021. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We think CEO compensation looks appropriate given the data we have put together.

Check out our latest analysis for Sisram Medical

Comparing Sisram Medical Ltd's CEO Compensation With the industry

According to our data, Sisram Medical Ltd has a market capitalization of HK$6.8b, and paid its CEO total annual compensation worth US$769k over the year to December 2020. That's mostly flat as compared to the prior year's compensation. We note that the salary portion, which stands at US$596.0k constitutes the majority of total compensation received by the CEO.

On comparing similar companies from the same industry with market caps ranging from HK$3.1b to HK$12b, we found that the median CEO total compensation was US$2.1m. That is to say, Lior Dayan is paid under the industry median. What's more, Lior Dayan holds HK$1.7m worth of shares in the company in their own name.

Component	2020	2019	Proportion (2020)
Salary	US$596k	US$606k	78%
Other	US$173k	US$153k	22%
Total Compensation	US$769k	US$759k	100%

Talking in terms of the broader industry, salary and other compensation roughly make up 50% each, of the total compensation. Sisram Medical is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Sisram Medical Ltd's Growth Numbers

Over the last three years, Sisram Medical Ltd has shrunk its earnings per share by 8.0% per year. It saw its revenue drop 6.5% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Sisram Medical Ltd Been A Good Investment?

We think that the total shareholder return of 226%, over three years, would leave most Sisram Medical Ltd shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. These concerns could be addressed to the board and shareholders should revisit their investment thesis to see if it still makes sense.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Sisram Medical that investors should be aware of in a dynamic business environment.

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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