We Think Lee and Man Paper Manufacturing Limited's (HKG:2314) CEO Compensation Package Needs To Be Put Under A Microscope

Lee and Man Paper Manufacturing Limited (HKG:2314) has not performed well recently and CEO Man Bun Lee will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 30 April 2021. 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.

View our latest analysis for Lee and Man Paper Manufacturing

Comparing Lee and Man Paper Manufacturing Limited's CEO Compensation With the industry

At the time of writing, our data shows that Lee and Man Paper Manufacturing Limited has a market capitalization of HK$31b, and reported total annual CEO compensation of HK$18m for the year to December 2020. That's a fairly small increase of 6.8% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$2.7m.

On comparing similar companies from the same industry with market caps ranging from HK$16b to HK$50b, we found that the median CEO total compensation was HK$9.7m. Hence, we can conclude that Man Bun Lee is remunerated higher than the industry median. What's more, Man Bun Lee holds HK$9.6b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	HK$2.7m	HK$1.7m	15%
Other	HK$15m	HK$15m	85%
Total Compensation	HK$18m	HK$17m	100%

On an industry level, around 91% of total compensation represents salary and 9% is other remuneration. It's interesting to note that Lee and Man Paper Manufacturing allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Lee and Man Paper Manufacturing Limited's Growth

Lee and Man Paper Manufacturing Limited has reduced its earnings per share by 10% a year over the last three years. Its revenue is down 4.7% over the previous year.

Overall this is not a very positive result for shareholders. 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. 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 Lee and Man Paper Manufacturing Limited Been A Good Investment?

With a three year total loss of 5.3% for the shareholders, Lee and Man Paper Manufacturing Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

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 Lee and Man Paper Manufacturing that you should be aware of before investing.

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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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