Key Insights

• Lenovo Group's Annual General Meeting to take place on 18th of July
• Salary of US$1.33m is part of CEO Yuanqing Yang's total remuneration
• Total compensation is 1,028% above industry average
• Over the past three years, Lenovo Group's EPS fell by 5.1% and over the past three years, the total shareholder return was 56%

Lenovo Group Limited (HKG:992) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 18th of July. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

How Does Total Compensation For Yuanqing Yang Compare With Other Companies In The Industry?

According to our data, Lenovo Group Limited has a market capitalization of HK$142b, and paid its CEO total annual compensation worth US$19m over the year to March 2024. We note that's a decrease of 13% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.

For comparison, other companies in the Hong Kong Tech industry with market capitalizations above HK$62b, reported a median total CEO compensation of US$1.7m. This suggests that Yuanqing Yang is paid more than the median for the industry. Moreover, Yuanqing Yang also holds HK$8.4b worth of Lenovo Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 75% of total compensation out of all the companies we analyzed, while other remuneration made up 25% of the pie. Lenovo Group pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Lenovo Group Limited's Growth Numbers

Lenovo Group Limited has reduced its earnings per share by 5.1% a year over the last three years. In the last year, its revenue is down 8.2%.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Lenovo Group Limited Been A Good Investment?

We think that the total shareholder return of 56%, over three years, would leave most Lenovo Group Limited shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for Lenovo Group that investors should think about before committing capital to this stock.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com