In 2010 Charles Li was appointed CEO of Hong Kong Exchanges and Clearing Limited (HKG:388). First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Charles Li's Compensation Compare With Similar Sized Companies?
Our data indicates that Hong Kong Exchanges and Clearing Limited is worth HK$291b, and total annual CEO compensation was reported as HK$52m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at HK$9.1m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over HK$63b, and calculated the median CEO total compensation to be HK$6.2m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
As you can see, Charles Li is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Hong Kong Exchanges and Clearing Limited is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Hong Kong Exchanges and Clearing has changed over time.
Is Hong Kong Exchanges and Clearing Limited Growing?
Hong Kong Exchanges and Clearing Limited has increased its earnings per share (EPS) by an average of 17% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 7.7%.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has Hong Kong Exchanges and Clearing Limited Been A Good Investment?
Hong Kong Exchanges and Clearing Limited has generated a total shareholder return of 20% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
We compared the total CEO remuneration paid by Hong Kong Exchanges and Clearing Limited, and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. We also think investors are doing ok, over the same time period. You might wish to research management further, but on this analysis, considering the EPS growth, we wouldn't call the CEO pay problematic. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Hong Kong Exchanges and Clearing.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.