We Discuss Why Luye Pharma Group Ltd.'s (HKG:2186) CEO Compensation May Be Closely Reviewed

Key Insights

• Luye Pharma Group will host its Annual General Meeting on 28th of May
• Total pay for CEO Dian Bo Liu includes CN¥3.14m salary
• Total compensation is similar to the industry average
• Luye Pharma Group's three-year loss to shareholders was 49% while its EPS was down 14% over the past three years

The results at Luye Pharma Group Ltd. (HKG:2186) have been quite disappointing recently and CEO Dian Bo Liu bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 28th of May. 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for Luye Pharma Group

How Does Total Compensation For Dian Bo Liu Compare With Other Companies In The Industry?

At the time of writing, our data shows that Luye Pharma Group Ltd. has a market capitalization of HK$10b, and reported total annual CEO compensation of CN¥4.2m for the year to December 2023. Notably, that's an increase of 32% over the year before. In particular, the salary of CN¥3.14m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies from the Hong Kong Pharmaceuticals industry with market caps ranging from HK$7.8b to HK$25b, we found that the median CEO total compensation was CN¥4.2m. From this we gather that Dian Bo Liu is paid around the median for CEOs in the industry.

Component	2023	2022	Proportion (2023)
Salary	CN¥3.1m	CN¥3.1m	75%
Other	CN¥1.0m	CN¥75k	25%
Total Compensation	CN¥4.2m	CN¥3.2m	100%

Talking in terms of the industry, salary represented approximately 63% of total compensation out of all the companies we analyzed, while other remuneration made up 37% of the pie. According to our research, Luye Pharma Group has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Luye Pharma Group Ltd.'s Growth

Over the last three years, Luye Pharma Group Ltd. has shrunk its earnings per share by 14% per year. It achieved revenue growth of 2.7% over the last year.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Luye Pharma Group Ltd. Been A Good Investment?

The return of -49% over three years would not have pleased Luye Pharma Group Ltd. shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Luye Pharma Group (free visualization of insider trades).

Switching gears from Luye Pharma Group, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.