In 2009 Yuanqing Yang was appointed CEO of Lenovo Group Limited (HKG:992). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Yuanqing Yang's Compensation Compare With Similar Sized Companies?
According to our data, Lenovo Group Limited has a market capitalization of HK$68b, and pays its CEO total annual compensation worth US$15m. (This number is for the twelve months until March 2019). That's actually a decrease on the year before. We think total compensation is more important but we note that the CEO salary is lower, at US$1.3m. We looked at a group of companies with market capitalizations from US$4.0b to US$12b, and the median CEO total compensation was US$629k.
Thus we can conclude that Yuanqing Yang receives more in total compensation than the median of a group of companies in the same market, and of similar size to Lenovo Group Limited. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at Lenovo Group, below.
Is Lenovo Group Limited Growing?
Over the last three years Lenovo Group Limited has shrunk its earnings per share by an average of 2.5% per year (measured with a line of best fit). Its revenue is up 9.3% over last year.
In the last three years the company has failed to grow earnings per share. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has Lenovo Group Limited Been A Good Investment?
Lenovo Group Limited has generated a total shareholder return of 27% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
We examined the amount Lenovo Group Limited pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.
While shareholder returns are acceptable, they don't delight. So we think more research is needed, but we don't think the CEO underpaid. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Lenovo Group.
Important note: Lenovo Group 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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