Shareholders Will Probably Hold Off On Increasing Beijing Enterprises Water Group Limited's (HKG:371) CEO Compensation For The Time Being

Key Insights

• Beijing Enterprises Water Group will host its Annual General Meeting on 5th of June
• Salary of CN¥10.0m is part of CEO Min Zhou's total remuneration
• The overall pay is 328% above the industry average
• Beijing Enterprises Water Group's EPS declined by 20% over the past three years while total shareholder return over the past three years was 0.4%

The anaemic share price growth at Beijing Enterprises Water Group Limited (HKG:371) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 5th of June. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Beijing Enterprises Water Group

How Does Total Compensation For Min Zhou Compare With Other Companies In The Industry?

Our data indicates that Beijing Enterprises Water Group Limited has a market capitalization of HK$26b, and total annual CEO compensation was reported as CN¥10m for the year to December 2023. We note that's a decrease of 47% compared to last year. In particular, the salary of CN¥10.0m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Hong Kong Water Utilities industry with market capitalizations ranging from HK$16b to HK$50b, the reported median CEO total compensation was CN¥2.4m. This suggests that Min Zhou is paid more than the median for the industry. What's more, Min Zhou holds HK$942m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	CN¥10m	CN¥15m	97%
Other	CN¥284k	CN¥4.1m	3%
Total Compensation	CN¥10m	CN¥20m	100%

On an industry level, roughly 86% of total compensation represents salary and 14% is other remuneration. Investors will find it interesting that Beijing Enterprises Water Group pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Beijing Enterprises Water Group Limited's Growth

Over the last three years, Beijing Enterprises Water Group Limited has shrunk its earnings per share by 20% per year. It achieved revenue growth of 14% over the last year.

Overall this is not a very positive result for shareholders. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Beijing Enterprises Water Group Limited Been A Good Investment?

Beijing Enterprises Water Group Limited has generated a total shareholder return of 0.4% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.

To Conclude...

Beijing Enterprises Water Group pays its CEO a majority of compensation through a salary. The lacklustre share price returns along with the lack of earnings growth makes us think that a strong rebound in the share price may be difficult. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 3 warning signs for Beijing Enterprises Water Group (1 is concerning!) that you should be aware of before investing here.

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. 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.