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What We Learnt About American Assets Trust's (NYSE:AAT) CEO Compensation

Simply Wall St
·4 mins read

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Ernest Rady became the CEO of American Assets Trust, Inc. (NYSE:AAT) in 2015, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

View our latest analysis for American Assets Trust

Comparing American Assets Trust, Inc.'s CEO Compensation With the industry

Our data indicates that American Assets Trust, Inc. has a market capitalization of US$2.1b, and total annual CEO compensation was reported as US$3.8m for the year to December 2019. We note that's a small decrease of 4.0% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$546k.

For comparison, other companies in the same industry with market capitalizations ranging between US$1.0b and US$3.2b had a median total CEO compensation of US$5.0m. This suggests that American Assets Trust remunerates its CEO largely in line with the industry average. Moreover, Ernest Rady also holds US$171m worth of American Assets Trust stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2019

2018

Proportion (2019)

Salary

US$546k

US$530k

14%

Other

US$3.2m

US$3.4m

86%

Total Compensation

US$3.8m

US$3.9m

100%

Speaking on an industry level, nearly 15% of total compensation represents salary, while the remainder of 85% is other remuneration. There isn't a significant difference between American Assets Trust 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.

ceo-compensation
ceo-compensation

American Assets Trust, Inc.'s Growth

American Assets Trust, Inc.'s earnings per share (EPS) grew 4.7% per year over the last three years. It achieved revenue growth of 13% over the last year.

This revenue growth could really point to a brighter future. And the modest growth in earnings per share isn't bad, either. So while performance isn't amazing, we think it really does seem quite respectable. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

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

Given the total shareholder loss of 26% over three years, many shareholders in American Assets Trust, Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we touched on above, American Assets Trust, Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look good when you place it against the backdrop of negative shareholder returns and flat earnings growth. Although we wouldn't say CEO compensation is exceptionally high, it isn't very low either. Shareholders might want to see substantial improvements in returns before agreeing that Ernest deserves a raise.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for American Assets Trust (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.

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.

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