Key Insights

• Zuoli Kechuang Micro-finance's Annual General Meeting to take place on 25th of June
• Salary of CN¥581.0k is part of CEO Sheng Yang's total remuneration
• The total compensation is similar to the average for the industry
• Over the past three years, Zuoli Kechuang Micro-finance's EPS fell by 0.6% and over the past three years, the total shareholder return was 9.5%

Despite Zuoli Kechuang Micro-finance Company Limited's (HKG:6866) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. The upcoming AGM on 25th of June may be an opportunity for shareholders to bring up any concerns they may have for the board's attention. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Comparing Zuoli Kechuang Micro-finance Company Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Zuoli Kechuang Micro-finance Company Limited has a market capitalization of HK$389m, and reported total annual CEO compensation of CN¥747k for the year to December 2023. That's mostly flat as compared to the prior year's compensation. Notably, the salary which is CN¥581.0k, represents most of the total compensation being paid.

For comparison, other companies in the Hong Kong Consumer Finance industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of CN¥747k. From this we gather that Sheng Yang is paid around the median for CEOs in the industry.

On an industry level, roughly 78% of total compensation represents salary and 22% is other remuneration. Zuoli Kechuang Micro-finance is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Zuoli Kechuang Micro-finance Company Limited's Growth

Over the last three years, Zuoli Kechuang Micro-finance Company Limited has not seen its earnings per share change much, though they have deteriorated slightly. Its revenue is up 3.8% over the last year.

A lack of EPS improvement is not good to see. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Zuoli Kechuang Micro-finance Company Limited Been A Good Investment?

Zuoli Kechuang Micro-finance Company Limited has not done too badly by shareholders, with a total return of 9.5%, over three years. It would be nice to see that metric improve in the future. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company's remuneration policies and evaluate if the board's judgement and decision-making is aligned with that of the company's shareholders.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Zuoli Kechuang Micro-finance (1 shouldn't be ignored!) that you should be aware of before investing here.

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.

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