Increases to Leader Steel Holdings Berhad's (KLSE:LSTEEL) CEO Compensation Might Cool off for now

Leader Steel Holdings Berhad (KLSE:LSTEEL) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 20 May 2021. 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.

See our latest analysis for Leader Steel Holdings Berhad

Comparing Leader Steel Holdings Berhad's CEO Compensation With the industry

According to our data, Leader Steel Holdings Berhad has a market capitalization of RM94m, and paid its CEO total annual compensation worth RM1.1m over the year to December 2020. Notably, that's an increase of 12% over the year before. In particular, the salary of RM1.01m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below RM826m, reported a median total CEO compensation of RM683k. Hence, we can conclude that Pak Tan is remunerated higher than the industry median. What's more, Pak Tan holds RM956k worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	RM1.0m	RM888k	96%
Other	RM38k	RM49k	4%
Total Compensation	RM1.1m	RM937k	100%

Speaking on an industry level, nearly 78% of total compensation represents salary, while the remainder of 22% is other remuneration. Investors will find it interesting that Leader Steel Holdings Berhad pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Leader Steel Holdings Berhad's Growth

Over the last three years, Leader Steel Holdings Berhad has shrunk its earnings per share by 7.9% per year. It saw its revenue drop 27% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Leader Steel Holdings Berhad Been A Good Investment?

We think that the total shareholder return of 68%, over three years, would leave most Leader Steel Holdings Berhad shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

Pak receives almost all of their compensation through a salary. While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 4 warning signs for Leader Steel Holdings Berhad that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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