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How Should Investors React To China Hongqiao Group Limited's (HKG:1378) CEO Pay?

Simply Wall St

In 2011 Bo Zhang was appointed CEO of China Hongqiao Group Limited (HKG:1378). First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for China Hongqiao Group

How Does Bo Zhang's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that China Hongqiao Group Limited has a market cap of HK$29b, and reported total annual CEO compensation of CN¥955k for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at CN¥141k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from CN¥14b to CN¥45b, and the median CEO total compensation was CN¥3.9m.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. Though positive, it's important we delve into the performance of the actual business.

The graphic below shows how CEO compensation at China Hongqiao Group has changed from year to year.

SEHK:1378 CEO Compensation, March 16th 2020

Is China Hongqiao Group Limited Growing?

China Hongqiao Group Limited has reduced its earnings per share by an average of 7.0% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is down 8.2%.

Unfortunately, earnings per share have trended lower over the last three years. 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. Shareholders might be interested in this free visualization of analyst forecasts.

Has China Hongqiao Group Limited Been A Good Investment?

Given the total loss of 51% over three years, many shareholders in China Hongqiao Group Limited are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

It appears that China Hongqiao Group Limited remunerates its CEO below most similar sized companies.

The compensation paid to Bo Zhang is lower than is usual at similar sized companies, but the eps growth is lacking, just like the returns (over three years). Considering all these factors, we'd stop short of saying the CEO pay is too high, but we don't think shareholders would want to see a pay rise before business performance improves. Taking a breather from CEO compensation, we've spotted 4 warning signs for China Hongqiao Group (of which 1 is potentially serious!) you should know about in order to have a holistic understanding of the stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.