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Is American Assets Trust, Inc.'s (NYSE:AAT) CEO Salary Justified?

Simply Wall St

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In 2015 Ernest Rady was appointed CEO of American Assets Trust, Inc. (NYSE:AAT). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for American Assets Trust

How Does Ernest Rady's Compensation Compare With Similar Sized Companies?

According to our data, American Assets Trust, Inc. has a market capitalization of US$2.9b, and pays its CEO total annual compensation worth US$3.9m. (This is based on the year to December 2018). Notably, that's an increase of 59% over the year before. While we always look at total compensation first, we note that the salary component is less, at US$530k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$2.0b to US$6.4b. The median total CEO compensation was US$5.3m.

So Ernest Rady receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.

The graphic below shows how CEO compensation at American Assets Trust has changed from year to year.

NYSE:AAT CEO Compensation, June 7th 2019

Is American Assets Trust, Inc. Growing?

Over the last three years American Assets Trust, Inc. has shrunk its earnings per share by an average of 20% per year (measured with a line of best fit). In the last year, its revenue is up 4.3%.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the modest revenue growth over 12 months isn't much comfort against the reduced earnings per share. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.

Has American Assets Trust, Inc. Been A Good Investment?

American Assets Trust, Inc. has generated a total shareholder return of 21% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

Remuneration for Ernest Rady is close enough to the median pay for a CEO of a similar sized company .

We're not seeing great strides in earnings per share, and total returns were decent but not amazing in the last three years. This contrasts with the growth in CEO remuneration. We do not think the CEO pay is a problem, but one might argue that the company should improve returns to shareholders before increasing it. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling American Assets Trust (free visualization of insider trades).

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.