Shareholders May Find It Hard To Justify Increasing Cornerstone Financial Holdings Limited's (HKG:8112) CEO Compensation For Now

The underwhelming share price performance of Cornerstone Financial Holdings Limited (HKG:8112) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 11 May 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

See our latest analysis for Cornerstone Financial Holdings

How Does Total Compensation For Patrick Jonathan Wong Compare With Other Companies In The Industry?

Our data indicates that Cornerstone Financial Holdings Limited has a market capitalization of HK$20m, and total annual CEO compensation was reported as HK$2.6m for the year to December 2020. That's slightly lower by 6.4% over the previous year. In particular, the salary of HK$1.82m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$2.6m. This suggests that Cornerstone Financial Holdings remunerates its CEO largely in line with the industry average. What's more, Patrick Jonathan Wong holds HK$1.1m 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$1.8m	HK$2.0m	71%
Other	HK$744k	HK$786k	29%
Total Compensation	HK$2.6m	HK$2.7m	100%

On an industry level, around 84% of total compensation represents salary and 16% is other remuneration. In Cornerstone Financial Holdings' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Cornerstone Financial Holdings Limited's Growth Numbers

Cornerstone Financial Holdings Limited has seen its earnings per share (EPS) increase by 52% a year over the past three years. In the last year, its revenue is down 45%.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Cornerstone Financial Holdings Limited Been A Good Investment?

The return of -93% over three years would not have pleased Cornerstone Financial Holdings Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might 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. In our study, we found 3 warning signs for Cornerstone Financial Holdings you should be aware of, and 2 of them don't sit too well with us.

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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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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