Should Shareholders Reconsider Sunshine 100 China Holdings Ltd's (HKG:2608) CEO Compensation Package?

Sunshine 100 China Holdings Ltd (HKG:2608) has not performed well recently and CEO Xiaodi Yi will probably need to up their game. At the upcoming AGM on 25 June 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.

Check out our latest analysis for Sunshine 100 China Holdings

How Does Total Compensation For Xiaodi Yi Compare With Other Companies In The Industry?

Our data indicates that Sunshine 100 China Holdings Ltd has a market capitalization of HK$3.1b, and total annual CEO compensation was reported as CN¥1.9m for the year to December 2020. Notably, that's a decrease of 9.1% over the year before. In particular, the salary of CN¥1.15m, makes up a fairly large portion of the total compensation being paid to the CEO.

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 CN¥2.4m. So it looks like Sunshine 100 China Holdings compensates Xiaodi Yi in line with the median for the industry.

Component	2020	2019	Proportion (2020)
Salary	CN¥1.2m	CN¥1.2m	59%
Other	CN¥785k	CN¥884k	41%
Total Compensation	CN¥1.9m	CN¥2.1m	100%

On an industry level, around 69% of total compensation represents salary and 31% is other remuneration. It's interesting to note that Sunshine 100 China Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Sunshine 100 China Holdings Ltd's Growth

Sunshine 100 China Holdings Ltd has reduced its earnings per share by 12% a year over the last three years. In the last year, its revenue is down 31%.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Sunshine 100 China Holdings Ltd Been A Good Investment?

With a total shareholder return of -49% over three years, Sunshine 100 China Holdings Ltd shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 3 warning signs for Sunshine 100 China Holdings you should be aware of, and 1 of them is concerning.

Switching gears from Sunshine 100 China Holdings, 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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