CEO Min-Liang Tan has done a decent job of delivering relatively good performance at Razer Inc. (HKG:1337) recently. As shareholders go into the upcoming AGM on 02 June 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. Here is our take on why we think the CEO compensation looks appropriate.
View our latest analysis for Razer
How Does Total Compensation For Min-Liang Tan Compare With Other Companies In The Industry?
At the time of writing, our data shows that Razer Inc. has a market capitalization of HK$23b, and reported total annual CEO compensation of US$10m for the year to December 2020. Notably, that's a decrease of 51% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$479k.
On comparing similar companies from the same industry with market caps ranging from HK$16b to HK$50b, we found that the median CEO total compensation was US$8.1m. From this we gather that Min-Liang Tan is paid around the median for CEOs in the industry. Moreover, Min-Liang Tan also holds HK$8.1b worth of Razer stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | US$479k | US$524k | 5% |
| Other | US$10.0m | US$21m | 95% |
| Total Compensation | US$10m | US$21m | 100% |
On an industry level, roughly 83% of total compensation represents salary and 17% is other remuneration. Razer has chosen to walk a path less trodden, opting to compensate its CEO with less of a traditional salary and more non-salary rewards over the last year. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Razer Inc.'s Growth
Razer Inc.'s earnings per share (EPS) grew 70% per year over the last three years. In the last year, its revenue is up 48%.
This demonstrates that the company has been improving recently and is good news for the shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. 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 Razer Inc. Been A Good Investment?
With a total shareholder return of 14% over three years, Razer Inc. shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
In Summary...
Razer prefers rewarding its CEO through non-salary benefits. The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. However, we still think that any proposed increase in CEO compensation will be examined closely to make sure the compensation is appropriate and linked to performance.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Razer that investors should be aware of in a dynamic business environment.
Important note: Razer 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. 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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