Key Insights

• MECOM Power and Construction to hold its Annual General Meeting on 30th of May
• Total pay for CEO Sotto Tou includes MO$4.20m salary
• Total compensation is 109% above industry average
• MECOM Power and Construction's three-year loss to shareholders was 86% while its EPS was down 26% over the past three years

The results at MECOM Power and Construction Limited (HKG:1183) have been quite disappointing recently and CEO Sotto Tou bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 30th of May. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.

How Does Total Compensation For Sotto Tou Compare With Other Companies In The Industry?

Our data indicates that MECOM Power and Construction Limited has a market capitalization of HK$793m, and total annual CEO compensation was reported as MO$4.6m for the year to December 2023. We note that's an increase of 9.4% above last year. In particular, the salary of MO$4.20m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Hong Kong Construction industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was MO$2.2m. This suggests that Sotto Tou is paid more than the median for the industry.

Speaking on an industry level, nearly 83% of total compensation represents salary, while the remainder of 17% is other remuneration. It's interesting to note that MECOM Power and Construction pays out a greater portion of remuneration through salary, compared to the industry. 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.

A Look at MECOM Power and Construction Limited's Growth Numbers

Over the last three years, MECOM Power and Construction Limited has shrunk its earnings per share by 26% per year. Its revenue is up 12% over the last year.

Overall this is not a very positive result for shareholders. 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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has MECOM Power and Construction Limited Been A Good Investment?

The return of -86% over three years would not have pleased MECOM Power and Construction Limited shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid 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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for MECOM Power and Construction that investors should be aware of in a dynamic business environment.

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.