Key Insights

• China Oriental Group to hold its Annual General Meeting on 28th of June
• Salary of CN¥10.4m is part of CEO Jingyuan Han's total remuneration
• Total compensation is 768% above industry average
• China Oriental Group's three-year loss to shareholders was 50% while its EPS was down 65% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at China Oriental Group Company Limited (HKG:581) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28th of June. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Comparing China Oriental Group Company Limited's CEO Compensation With The Industry

At the time of writing, our data shows that China Oriental Group Company Limited has a market capitalization of HK$4.1b, and reported total annual CEO compensation of CN¥11m for the year to December 2023. That's a notable increase of 8.8% on last year. Notably, the salary which is CN¥10.4m, represents most of the total compensation being paid.

On comparing similar companies from the Hong Kong Metals and Mining industry with market caps ranging from HK$1.6b to HK$6.2b, we found that the median CEO total compensation was CN¥1.3m. This suggests that Jingyuan Han is paid more than the median for the industry. What's more, Jingyuan Han holds HK$97m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 86% of total compensation represents salary and 14% is other remuneration. Although there is a difference in how total compensation is set, China Oriental Group more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

China Oriental Group Company Limited's Growth

Over the last three years, China Oriental Group Company Limited has shrunk its earnings per share by 65% per year. It saw its revenue drop 4.9% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 China Oriental Group Company Limited Been A Good Investment?

Few China Oriental Group Company Limited shareholders would feel satisfied with the return of -50% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. 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 compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for China Oriental Group that you should be aware of before investing.

Important note: China Oriental 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.

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