Shareholders Will Probably Hold Off On Increasing Mongolian Mining Corporation's (HKG:975) CEO Compensation For The Time Being

Mongolian Mining Corporation (HKG:975) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. The upcoming AGM on 16 June 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Mongolian Mining

How Does Total Compensation For Battsengel Gotov Compare With Other Companies In The Industry?

Our data indicates that Mongolian Mining Corporation has a market capitalization of HK$2.7b, and total annual CEO compensation was reported as US$867k for the year to December 2020. Notably, that's a decrease of 22% over the year before. We note that the salary portion, which stands at US$704.0k constitutes the majority of total compensation received by the CEO.

On comparing similar companies from the same industry with market caps ranging from HK$1.6b to HK$6.2b, we found that the median CEO total compensation was US$186k. Accordingly, our analysis reveals that Mongolian Mining Corporation pays Battsengel Gotov north of the industry median.

Component	2020	2019	Proportion (2020)
Salary	US$704k	US$867k	81%
Other	US$163k	US$240k	19%
Total Compensation	US$867k	US$1.1m	100%

On an industry level, around 84% of total compensation represents salary and 16% is other remuneration. Mongolian Mining is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Mongolian Mining Corporation's Growth Numbers

Over the last three years, Mongolian Mining Corporation has shrunk its earnings per share by 55% per year. Its revenue is down 33% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Mongolian Mining Corporation Been A Good Investment?

We think that the total shareholder return of 80%, over three years, would leave most Mongolian Mining Corporation shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Mongolian Mining (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Mongolian Mining, 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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