We Discuss Why Zai Lab Limited's (NASDAQ:ZLAB) CEO May Deserve A Higher Pay Packet

Shareholders will probably not be disappointed by the robust results at Zai Lab Limited (NASDAQ:ZLAB) recently and they will be keeping this in mind as they go into the AGM on 24 June 2021. This would also be a chance for them to hear the board review the financial results, discuss future company strategy to further improve the business and vote on any resolutions such as executive remuneration. We have prepared some analysis below and we show why we think CEO compensation looks decent with even the possibility for a raise.

See our latest analysis for Zai Lab

How Does Total Compensation For Samantha Du Compare With Other Companies In The Industry?

At the time of writing, our data shows that Zai Lab Limited has a market capitalization of US$15b, and reported total annual CEO compensation of US$8.5m for the year to December 2020. We note that's a small decrease of 3.8% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$689k.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$16m. This suggests that Samantha Du is paid below the industry median. Furthermore, Samantha Du directly owns US$164m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. It's interesting to note that Zai Lab allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Zai Lab Limited's Growth Numbers

Over the last three years, Zai Lab Limited has shrunk its earnings per share by 29% per year. Its revenue is up 212% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Zai Lab Limited Been A Good Investment?

We think that the total shareholder return of 573%, over three years, would leave most Zai Lab Limited shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

The company's overall performance, while not bad, could be better. Assuming the business continues to grow at a good clip, few shareholders would raise any objections to the CEO's remuneration. Instead, investors might be more interested in discussions that would help manage their longer-term growth expectations such as company business strategies and future growth potential.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 1 warning sign for Zai Lab that investors should look into moving forward.

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.

This article by Simply Wall St is general in nature. 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.

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