Should Shareholders Reconsider Luks Group (Vietnam Holdings) Company Limited's (HKG:366) CEO Compensation Package?

Luks Group (Vietnam Holdings) Company Limited (HKG:366) has not performed well recently and CEO Cheung Cheng 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 11 June 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Luks Group (Vietnam Holdings)

Comparing Luks Group (Vietnam Holdings) Company Limited's CEO Compensation With the industry

At the time of writing, our data shows that Luks Group (Vietnam Holdings) Company Limited has a market capitalization of HK$694m, and reported total annual CEO compensation of HK$2.2m for the year to December 2020. That's a notable decrease of 29% on last year. Notably, the salary which is HK$2.08m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$800k. Hence, we can conclude that Cheung Cheng is remunerated higher than the industry median. What's more, Cheung Cheng holds HK$80m 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$2.1m	HK$3.0m	95%
Other	HK$100k	HK$100k	5%
Total Compensation	HK$2.2m	HK$3.1m	100%

On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. Investors will find it interesting that Luks Group (Vietnam Holdings) pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. 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.

A Look at Luks Group (Vietnam Holdings) Company Limited's Growth Numbers

Luks Group (Vietnam Holdings) Company Limited has reduced its earnings per share by 13% a year over the last three years. Its revenue is down 19% over the previous year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last 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 Luks Group (Vietnam Holdings) Company Limited Been A Good Investment?

Few Luks Group (Vietnam Holdings) Company Limited shareholders would feel satisfied with the return of -38% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Cheung receives almost all of their compensation through a salary. 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.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 3 warning signs for Luks Group (Vietnam Holdings) that investors should think about before committing capital to this stock.

Switching gears from Luks Group (Vietnam Holdings), if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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