The results at Lee & Man Chemical Company Limited (HKG:746) have been quite disappointing recently and CEO Man Yan Lee bears some responsibility for this. At the upcoming AGM on 30 April 2021, shareholders can hear from the board including their plans for turning around performance. 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.
How Does Total Compensation For Man Yan Lee Compare With Other Companies In The Industry?
According to our data, Lee & Man Chemical Company Limited has a market capitalization of HK$3.5b, and paid its CEO total annual compensation worth HK$37m over the year to December 2020. That's a fairly small increase of 5.6% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at HK$1.2m.
In comparison with other companies in the industry with market capitalizations ranging from HK$1.6b to HK$6.2b, the reported median CEO total compensation was HK$1.7m. Accordingly, our analysis reveals that Lee & Man Chemical Company Limited pays Man Yan Lee north of the industry median.
Speaking on an industry level, nearly 55% of total compensation represents salary, while the remainder of 45% is other remuneration. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to Man Yan Lee as compared to non-salary compensation over the one-year period examined. 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 Lee & Man Chemical Company Limited's Growth Numbers
Over the last three years, Lee & Man Chemical Company Limited has shrunk its earnings per share by 11% per year. It saw its revenue drop 11% over the last year.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Lee & Man Chemical Company Limited Been A Good Investment?
With a three year total loss of 12% for the shareholders, Lee & Man Chemical Company Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.
Lee & Man Chemical prefers rewarding its CEO through non-salary benefits. 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for Lee & Man Chemical that investors should look into moving forward.
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