The results at Dongyue Group Limited (HKG:189) have been quite disappointing recently and CEO Jianhong Zhang bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 10 June 2021. 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.
Comparing Dongyue Group Limited's CEO Compensation With the industry
Our data indicates that Dongyue Group Limited has a market capitalization of HK$13b, and total annual CEO compensation was reported as CN¥17m for the year to December 2020. That's a slight decrease of 6.8% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at CN¥6.0m.
On comparing similar companies from the same industry with market caps ranging from HK$7.8b to HK$25b, we found that the median CEO total compensation was CN¥2.4m. Hence, we can conclude that Jianhong Zhang is remunerated higher than the industry median. Furthermore, Jianhong Zhang directly owns HK$1.6b worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 57% of total compensation out of all the companies we analyzed, while other remuneration made up 43% of the pie. Dongyue Group sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at Dongyue Group Limited's Growth Numbers
Over the last three years, Dongyue Group Limited has shrunk its earnings per share by 21% per year. In the last year, its revenue is down 22%.
The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Dongyue Group Limited Been A Good Investment?
Since shareholders would have lost about 3.0% over three years, some Dongyue Group Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for Dongyue Group 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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