Here's Why Shareholders May Want To Be Cautious With Increasing Pacific & Orient Berhad's (KLSE:P&O) CEO Pay Packet
Key Insights
Pacific & Orient Berhad to hold its Annual General Meeting on 8th of March
Salary of RM1.46m is part of CEO Thye Seng Chan's total remuneration
The overall pay is 1,561% above the industry average
Pacific & Orient Berhad's EPS declined by 37% over the past three years while total shareholder return over the past three years was 17%
The share price of Pacific & Orient Berhad (KLSE:P&O) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 8th of March. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
View our latest analysis for Pacific & Orient Berhad
Comparing Pacific & Orient Berhad's CEO Compensation With The Industry
Our data indicates that Pacific & Orient Berhad has a market capitalization of RM251m, and total annual CEO compensation was reported as RM3.2m for the year to September 2023. We note that's an increase of 65% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at RM1.5m.
On comparing similar-sized companies in the Malaysian Insurance industry with market capitalizations below RM949m, we found that the median total CEO compensation was RM190k. Hence, we can conclude that Thye Seng Chan is remunerated higher than the industry median. What's more, Thye Seng Chan holds RM91m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2023 | 2021 | Proportion (2023) |
Salary | RM1.5m | RM1.3m | 46% |
Other | RM1.7m | RM567k | 54% |
Total Compensation | RM3.2m | RM1.9m | 100% |
On an industry level, around 48% of total compensation represents salary and 52% is other remuneration. There isn't a significant difference between Pacific & Orient Berhad and the broader market, in terms of salary allocation in the overall compensation package. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Pacific & Orient Berhad's Growth Numbers
Over the last three years, Pacific & Orient Berhad has shrunk its earnings per share by 37% per year. In the last year, its revenue is down 11%.
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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Pacific & Orient Berhad Been A Good Investment?
Pacific & Orient Berhad has served shareholders reasonably well, with a total return of 17% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
To Conclude...
Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with 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. That's why we did some digging and identified 2 warning signs for Pacific & Orient Berhad that you should be aware of before investing.
Switching gears from Pacific & Orient Berhad, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.