Shareholders May Not Be So Generous With PCCW Limited's (HKG:8) CEO Compensation And Here's Why

Despite positive share price growth of 18% for PCCW Limited (HKG:8) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 07 May 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

See our latest analysis for PCCW

Comparing PCCW Limited's CEO Compensation With the industry

Our data indicates that PCCW Limited has a market capitalization of HK$35b, and total annual CEO compensation was reported as HK$22m for the year to December 2020. Notably, that's a decrease of 16% over the year before. We note that the salary of HK$11.2m makes up a sizeable portion of the total compensation received by the CEO.

On examining similar-sized companies in the industry with market capitalizations between HK$16b and HK$50b, we discovered that the median CEO total compensation of that group was HK$12m. Hence, we can conclude that BG Srinivas Gangaiah is remunerated higher than the industry median. Furthermore, BG Srinivas Gangaiah directly owns HK$16m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	HK$11m	HK$11m	50%
Other	HK$11m	HK$16m	50%
Total Compensation	HK$22m	HK$27m	100%

On an industry level, roughly 41% of total compensation represents salary and 59% is other remuneration. It's interesting to note that PCCW pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at PCCW Limited's Growth Numbers

Over the last three years, PCCW Limited has shrunk its earnings per share by 75% per year. Its revenue is up 1.4% over the last year.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 PCCW Limited Been A Good Investment?

With a total shareholder return of 18% over three years, PCCW Limited shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 2 warning signs (and 1 which shouldn't be ignored) in PCCW we think you should know about.

Switching gears from PCCW, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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