We Think Digital China Holdings Limited's (HKG:861) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• Digital China Holdings will host its Annual General Meeting on 27th of June
• Total pay for CEO Wei Guo includes CN¥4.80m salary
• The total compensation is 113% higher than the average for the industry
• Over the past three years, Digital China Holdings' EPS fell by 95% and over the past three years, the total loss to shareholders 15%

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The results at Digital China Holdings Limited (HKG:861) have been quite disappointing recently and CEO Wei Guo 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 27th of June. 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.

See our latest analysis for Digital China Holdings

How Does Total Compensation For Wei Guo Compare With Other Companies In The Industry?

At the time of writing, our data shows that Digital China Holdings Limited has a market capitalization of HK$5.2b, and reported total annual CEO compensation of CN¥6.1m for the year to December 2024. That's a notable decrease of 8.1% on last year. We note that the salary portion, which stands at CN¥4.80m constitutes the majority of total compensation received by the CEO.

On comparing similar companies from the Hong Kong IT industry with market caps ranging from HK$3.1b to HK$13b, we found that the median CEO total compensation was CN¥2.9m. Hence, we can conclude that Wei Guo is remunerated higher than the industry median. What's more, Wei Guo holds HK$695m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 82% of total compensation represents salary and 18% is other remuneration. Our data reveals that Digital China Holdings allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Digital China Holdings Limited's Growth

Over the last three years, Digital China Holdings Limited has shrunk its earnings per share by 95% per year. It saw its revenue drop 8.9% over the last year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Digital China Holdings Limited Been A Good Investment?

Since shareholders would have lost about 15% over three years, some Digital China Holdings Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

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, the board will get the chance to explain the steps it plans to take to improve business performance.

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. We did our research and spotted 1 warning sign for Digital China Holdings that investors should look into moving forward.

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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.