Kenneth Lam became the CEO of China Tonghai International Financial Limited (HKG:952) in 2011. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Kenneth Lam's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that China Tonghai International Financial Limited has a market cap of HK$1.9b, and reported total annual CEO compensation of HK$6.8m for the year to December 2019. That's less than last year. It is worth noting that the CEO compensation consists almost entirely of the salary, worth HK$6.8m. We looked at a group of companies with market capitalizations from HK$775m to HK$3.1b, and the median CEO total compensation was HK$2.2m.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Speaking on an industry level, we can see that nearly 75% of total compensation represents salary, while the remainder of 25% is other remuneration. Speaking on a company level, China Tonghai International Financial prefers to tread along a traditional path, disbursing all compensation through a salary.
Thus we can conclude that Kenneth Lam receives more in total compensation than the median of a group of companies in the same market, and of similar size to China Tonghai International Financial Limited. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. You can see a visual representation of the CEO compensation at China Tonghai International Financial, below.
Is China Tonghai International Financial Limited Growing?
Over the last three years China Tonghai International Financial Limited has seen earnings per share (EPS) move in a positive direction by an average of 83% per year (using a line of best fit). Its revenue is down 24% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. We don't have analyst forecasts, but you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has China Tonghai International Financial Limited Been A Good Investment?
With a three year total loss of 73%, China Tonghai International Financial Limited would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.
We examined the amount China Tonghai International Financial Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. While EPS is moving in the right direction, we'd say shareholders would want better returns before the CEO is paid much more. Shifting gears from CEO pay for a second, we've picked out 2 warning signs for China Tonghai International Financial that investors should be aware of in a dynamic business environment.
Important note: China Tonghai International Financial may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE 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. Thank you for reading.