Should Shareholders Have Second Thoughts About A Pay Rise For China Harmony Auto Holding Limited's (HKG:3836) CEO This Year?

Key Insights

• China Harmony Auto Holding's Annual General Meeting to take place on 18th of June
• Total pay for CEO Fenglei Liu includes CN¥631.0k salary
• The overall pay is 58% below the industry average
• Over the past three years, China Harmony Auto Holding's EPS fell by 7.0% and over the past three years, the total loss to shareholders 77%

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Performance at China Harmony Auto Holding Limited (HKG:3836) has not been particularly rosy recently and shareholders will likely be holding CEO Fenglei Liu and the board accountable for this. There is an opportunity for shareholders to influence management to turn the performance around by voting on resolutions such as executive remuneration at the AGM coming up on 18th of June. From our analysis below, we think CEO compensation looks appropriate for now.

View our latest analysis for China Harmony Auto Holding

Comparing China Harmony Auto Holding Limited's CEO Compensation With The Industry

Our data indicates that China Harmony Auto Holding Limited has a market capitalization of HK$944m, and total annual CEO compensation was reported as CN¥679k for the year to December 2024. That's a slight decrease of 3.8% on the prior year. Notably, the salary which is CN¥631.0k, represents most of the total compensation being paid.

In comparison with other companies in the Hong Kong Specialty Retail industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was CN¥1.6m. In other words, China Harmony Auto Holding pays its CEO lower than the industry median. Furthermore, Fenglei Liu directly owns HK$483k worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 85% of total compensation represents salary, while the remainder of 15% is other remuneration. Although there is a difference in how total compensation is set, China Harmony Auto Holding more or less reflects the market in terms of setting the salary. 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.

A Look at China Harmony Auto Holding Limited's Growth Numbers

Over the last three years, China Harmony Auto Holding Limited has shrunk its earnings per share by 7.0% per year. Its revenue is down 5.8% 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. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has China Harmony Auto Holding Limited Been A Good Investment?

Few China Harmony Auto Holding Limited shareholders would feel satisfied with the return of -77% over three years. This suggests it would be unwise for the company to pay the CEO too 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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for China Harmony Auto Holding that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.