Here's Why Shareholders May Want To Be Cautious With Increasing Hong Kong Economic Times Holdings Limited's (HKG:423) CEO Pay Packet

The anaemic share price growth at Hong Kong Economic Times Holdings Limited (HKG:423) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 05 August 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

View our latest analysis for Hong Kong Economic Times Holdings

How Does Total Compensation For Lawrence Fung Compare With Other Companies In The Industry?

At the time of writing, our data shows that Hong Kong Economic Times Holdings Limited has a market capitalization of HK$531m, and reported total annual CEO compensation of HK$3.9m for the year to March 2021. That's a slight decrease of 4.0% on the prior year. In particular, the salary of HK$3.24m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$2.6m. Accordingly, our analysis reveals that Hong Kong Economic Times Holdings Limited pays Lawrence Fung north of the industry median. Moreover, Lawrence Fung also holds HK$67m worth of Hong Kong Economic Times Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	HK$3.2m	HK$3.5m	84%
Other	HK$621k	HK$500k	16%
Total Compensation	HK$3.9m	HK$4.0m	100%

On an industry level, roughly 84% of total compensation represents salary and 16% is other remuneration. There isn't a significant difference between Hong Kong Economic Times Holdings and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Hong Kong Economic Times Holdings Limited's Growth Numbers

Over the last three years, Hong Kong Economic Times Holdings Limited has shrunk its earnings per share by 24% per year. In the last year, its revenue is down 12%.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Hong Kong Economic Times Holdings Limited Been A Good Investment?

Hong Kong Economic Times Holdings Limited has generated a total shareholder return of 2.9% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.

To Conclude...

The flat share price growth combined with the the fact that earnings have failed to grow makes us wonder whether the share price will have any further strong momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 3 warning signs (and 1 which is concerning) in Hong Kong Economic Times Holdings we think you should know about.

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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