Key Insights

• Expert Systems Holdings' Annual General Meeting to take place on 17th of September
• CEO Andy Lau's total compensation includes salary of HK$2.45m
• The overall pay is 95% above the industry average
• Expert Systems Holdings' EPS declined by 11% over the past three years while total shareholder loss over the past three years was 14%

Expert Systems Holdings Limited (HKG:8319) has not performed well recently and CEO Andy Lau will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 17th of September. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Comparing Expert Systems Holdings Limited's CEO Compensation With The Industry

Our data indicates that Expert Systems Holdings Limited has a market capitalization of HK$88m, and total annual CEO compensation was reported as HK$2.6m for the year to March 2024. That's just a smallish increase of 6.9% on last year. We note that the salary portion, which stands at HK$2.45m constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the Hong Kong IT industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was HK$1.3m. Hence, we can conclude that Andy Lau is remunerated higher than the industry median. Furthermore, Andy Lau directly owns HK$11m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 88% of total compensation represents salary, while the remainder of 12% is other remuneration. There isn't a significant difference between Expert Systems Holdings and the broader market, in terms of salary allocation in the overall compensation package. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Expert Systems Holdings Limited's Growth

Over the last three years, Expert Systems Holdings Limited has shrunk its earnings per share by 11% per year. Its revenue is up 12% over the last year.

The decline in EPS is a bit concerning. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Expert Systems Holdings Limited Been A Good Investment?

Since shareholders would have lost about 14% over three years, some Expert Systems Holdings Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 3 warning signs for Expert Systems Holdings that investors should look into moving forward.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.