Key Insights

• Founder Holdings will host its Annual General Meeting on 28th of May
• Total pay for CEO Xing Shao includes HK$1.18m salary
• The total compensation is 66% higher than the average for the industry
• Founder Holdings' three-year loss to shareholders was 31% while its EPS grew by 3.5% over the past three years

In the past three years, the share price of Founder Holdings Limited (HKG:418) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 28th of May could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

How Does Total Compensation For Xing Shao Compare With Other Companies In The Industry?

According to our data, Founder Holdings Limited has a market capitalization of HK$624m, and paid its CEO total annual compensation worth HK$2.2m over the year to December 2023. We note that's a decrease of 17% compared to last year. In particular, the salary of HK$1.18m, makes up a fairly large portion of the total compensation being paid to the CEO.

For comparison, other companies in the Hong Kong Software industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$1.3m. Accordingly, our analysis reveals that Founder Holdings Limited pays Xing Shao north of the industry median. Moreover, Xing Shao also holds HK$6.6m worth of Founder Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 59% of total compensation represents salary and 41% is other remuneration. Founder Holdings is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Founder Holdings Limited's Growth

Founder Holdings Limited has seen its earnings per share (EPS) increase by 3.5% a year over the past three years. It achieved revenue growth of 2.6% over the last year.

We're not particularly impressed by the revenue growth, but we're happy with the modest EPS growth. So there are some positives here, but not enough to earn high praise. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Founder Holdings Limited Been A Good Investment?

With a total shareholder return of -31% over three years, Founder Holdings Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 3 warning signs for Founder Holdings that you should be aware of before investing.

Important note: Founder Holdings 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.