Shareholders May Be Wary Of Increasing Semiconductor Manufacturing International Corporation's (HKG:981) CEO Compensation Package

Key Insights

• Semiconductor Manufacturing International's Annual General Meeting to take place on 28th of June
• CEO Haijun Zhao's total compensation includes salary of US$1.36m
• The total compensation is similar to the average for the industry
• Over the past three years, Semiconductor Manufacturing International's EPS fell by 6.4% and over the past three years, the total loss to shareholders 22%

Shareholders will probably not be too impressed with the underwhelming results at Semiconductor Manufacturing International Corporation (HKG:981) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28th of June. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Semiconductor Manufacturing International

Comparing Semiconductor Manufacturing International Corporation's CEO Compensation With The Industry

Our data indicates that Semiconductor Manufacturing International Corporation has a market capitalization of HK$215b, and total annual CEO compensation was reported as US$1.4m for the year to December 2023. That's a notable decrease of 11% on last year. We note that the salary portion, which stands at US$1.36m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the Hong Kong Semiconductor industry with market capitalizations above HK$62b, reported a median total CEO compensation of US$1.2m. This suggests that Semiconductor Manufacturing International remunerates its CEO largely in line with the industry average. Moreover, Haijun Zhao also holds HK$5.1m worth of Semiconductor Manufacturing International stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$1.4m	US$1.5m	99%
Other	US$10k	US$10k	1%
Total Compensation	US$1.4m	US$1.5m	100%

On an industry level, roughly 78% of total compensation represents salary and 22% is other remuneration. Semiconductor Manufacturing International has gone down a largely traditional route, paying Haijun Zhao a high salary, giving it preference over non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Semiconductor Manufacturing International Corporation's Growth

Semiconductor Manufacturing International Corporation has reduced its earnings per share by 6.4% a year over the last three years. In the last year, its revenue is down 4.1%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Semiconductor Manufacturing International Corporation Been A Good Investment?

Since shareholders would have lost about 22% over three years, some Semiconductor Manufacturing International Corporation investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Semiconductor Manufacturing International pays its CEO a majority of compensation through a salary. Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. 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.

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. We did our research and identified 2 warning signs (and 1 which shouldn't be ignored) in Semiconductor Manufacturing International we think you should know about.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com