How Should Investors React To China Green Agriculture's (NYSE:CGA) CEO Pay?

By
Simply Wall St
Published
February 17, 2021
NYSE:CGA
Source: Shutterstock

This article will reflect on the compensation paid to Richard Li who has served as CEO of China Green Agriculture, Inc. (NYSE:CGA) since 2017. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for China Green Agriculture.

See our latest analysis for China Green Agriculture

Comparing China Green Agriculture, Inc.'s CEO Compensation With the industry

According to our data, China Green Agriculture, Inc. has a market capitalization of US$34m, and paid its CEO total annual compensation worth US$420k over the year to June 2020. That's just a smallish increase of 4.5% on last year. In particular, the salary of US$300.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$389k. From this we gather that Richard Li is paid around the median for CEOs in the industry. What's more, Richard Li holds US$5.5m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$300k US$300k 71%
Other US$120k US$102k 29%
Total CompensationUS$420k US$402k100%

Talking in terms of the industry, salary represented approximately 19% of total compensation out of all the companies we analyzed, while other remuneration made up 81% of the pie. According to our research, China Green Agriculture has allocated a higher percentage of pay to salary in comparison to the wider industry. 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.

ceo-compensation
NYSE:CGA CEO Compensation February 18th 2021

A Look at China Green Agriculture, Inc.'s Growth Numbers

Over the last three years, China Green Agriculture, Inc. has shrunk its earnings per share by 114% per year. Its revenue is down 15% 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. 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 China Green Agriculture, Inc. Been A Good Investment?

Since shareholders would have lost about 67% over three years, some China Green Agriculture, Inc. investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude...

As previously discussed, Richard is compensated close to the median for companies of its size, and which belong to the same industry. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 4 warning signs for China Green Agriculture (of which 2 make us uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

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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