Should Shareholders Reconsider Transtech Optelecom Science Holdings Limited's (HKG:9963) CEO Compensation Package?

The results at Transtech Optelecom Science Holdings Limited (HKG:9963) have been quite disappointing recently and CEO Xingfu He bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28 May 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Transtech Optelecom Science Holdings

Comparing Transtech Optelecom Science Holdings Limited's CEO Compensation With the industry

Our data indicates that Transtech Optelecom Science Holdings Limited has a market capitalization of HK$398m, and total annual CEO compensation was reported as HK$1.8m for the year to December 2020. There was no change in the compensation compared to last year. Notably, the salary which is HK$1.41m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.9m. From this we gather that Xingfu He is paid around the median for CEOs in the industry.

Component	2020	2019	Proportion (2020)
Salary	HK$1.4m	HK$1.4m	79%
Other	HK$378k	HK$378k	21%
Total Compensation	HK$1.8m	HK$1.8m	100%

On an industry level, roughly 77% of total compensation represents salary and 23% is other remuneration. Transtech Optelecom Science Holdings is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Transtech Optelecom Science Holdings Limited's Growth Numbers

Transtech Optelecom Science Holdings Limited has reduced its earnings per share by 38% a year over the last three years. It saw its revenue drop 29% over the last year.

Few shareholders would be pleased to read that EPS have declined. 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. 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 Transtech Optelecom Science Holdings Limited Been A Good Investment?

The return of -42% over three years would not have pleased Transtech Optelecom Science Holdings Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 1 warning sign for Transtech Optelecom Science Holdings that investors should look into moving forward.

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. 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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