Key Insights

• Standard Development Group will host its Annual General Meeting on 6th of September
• Total pay for CEO Zhancheng Liu includes HK$3.50m salary
• The overall pay is 101% above the industry average
• Standard Development Group's EPS declined by 3.4% over the past three years while total shareholder loss over the past three years was 17%

Standard Development Group Limited (HKG:1867) has not performed well recently and CEO Zhancheng Liu will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 6th of September. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Comparing Standard Development Group Limited's CEO Compensation With The Industry

Our data indicates that Standard Development Group Limited has a market capitalization of HK$362m, and total annual CEO compensation was reported as HK$3.8m for the year to March 2024. That's just a smallish increase of 3.1% on last year. In particular, the salary of HK$3.50m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Hong Kong Commercial Services industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$1.9m. Hence, we can conclude that Zhancheng Liu is remunerated higher than the industry median. Moreover, Zhancheng Liu also holds HK$271m worth of Standard Development 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 81% of total compensation out of all the companies we analyzed, while other remuneration made up 19% of the pie. It's interesting to note that Standard Development Group pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Standard Development Group Limited's Growth Numbers

Over the last three years, Standard Development Group Limited has shrunk its earnings per share by 3.4% per year. In the last year, its revenue is down 26%.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Standard Development Group Limited Been A Good Investment?

With a three year total loss of 17% for the shareholders, Standard Development Group Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 2 warning signs for Standard Development Group (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Standard Development Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. 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. 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.