Here's Why Shareholders May Want To Be Cautious With Increasing Hua Hong Semiconductor Limited's (HKG:1347) CEO Pay Packet

Key Insights

• Hua Hong Semiconductor's Annual General Meeting to take place on 9th of May
• Total pay for CEO Junjun Tang includes US$196.0k salary
• The total compensation is similar to the average for the industry
• Hua Hong Semiconductor's EPS grew by 28% over the past three years while total shareholder loss over the past three years was 66%

Shareholders of Hua Hong Semiconductor Limited (HKG:1347) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 9th of May. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

View our latest analysis for Hua Hong Semiconductor

Comparing Hua Hong Semiconductor Limited's CEO Compensation With The Industry

According to our data, Hua Hong Semiconductor Limited has a market capitalization of HK$34b, and paid its CEO total annual compensation worth US$430k over the year to December 2023. That's a notable decrease of 41% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$196k.

On comparing similar companies from the Hong Kong Semiconductor industry with market caps ranging from HK$16b to HK$50b, we found that the median CEO total compensation was US$569k. This suggests that Hua Hong Semiconductor remunerates its CEO largely in line with the industry average.

Component	2023	2022	Proportion (2023)
Salary	US$196k	US$206k	46%
Other	US$234k	US$518k	54%
Total Compensation	US$430k	US$724k	100%

On an industry level, roughly 68% of total compensation represents salary and 32% is other remuneration. Hua Hong Semiconductor sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Hua Hong Semiconductor Limited's Growth Numbers

Hua Hong Semiconductor Limited's earnings per share (EPS) grew 28% per year over the last three years. In the last year, its revenue is down 7.7%.

This demonstrates that the company has been improving recently and is good news for the shareholders. While it would be good to see revenue growth, profits matter more in the end. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Hua Hong Semiconductor Limited Been A Good Investment?

With a total shareholder return of -66% over three years, Hua Hong Semiconductor Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. 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 a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for Hua Hong Semiconductor that investors should think about before committing capital to this stock.

Important note: Hua Hong Semiconductor is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.