We Think Batu Kawan Berhad's (KLSE:BKAWAN) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• Batu Kawan Berhad to hold its Annual General Meeting on 28th of February
• Total pay for CEO Hau-Hian Lee includes RM4.38m salary
• The total compensation is 908% higher than the average for the industry
• Batu Kawan Berhad's EPS declined by 36% over the past three years while total shareholder loss over the past three years was 14%

Batu Kawan Berhad (KLSE:BKAWAN) has not performed well recently and CEO Hau-Hian Lee will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28th of February. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Batu Kawan Berhad

Comparing Batu Kawan Berhad's CEO Compensation With The Industry

According to our data, Batu Kawan Berhad has a market capitalization of RM7.6b, and paid its CEO total annual compensation worth RM10m over the year to September 2024. That's a modest increase of 5.7% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at RM4.4m.

In comparison with other companies in the Malaysian Chemicals industry with market capitalizations ranging from RM4.4b to RM14b, the reported median CEO total compensation was RM995k. Hence, we can conclude that Hau-Hian Lee is remunerated higher than the industry median. Moreover, Hau-Hian Lee also holds RM31m worth of Batu Kawan Berhad stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	RM4.4m	RM4.1m	44%
Other	RM5.7m	RM5.4m	56%
Total Compensation	RM10m	RM9.5m	100%

On an industry level, roughly 60% of total compensation represents salary and 40% is other remuneration. In Batu Kawan Berhad's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Batu Kawan Berhad's Growth

Batu Kawan Berhad has reduced its earnings per share by 36% a year over the last three years. Its revenue is down 6.5% over the previous year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Batu Kawan Berhad Been A Good Investment?

With a three year total loss of 14% for the shareholders, Batu Kawan Berhad would certainly have some dissatisfied 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Batu Kawan Berhad you should be aware of, and 1 of them is a bit unpleasant.

Important note: Batu Kawan Berhad 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.