We Think Some Shareholders May Hesitate To Increase AAR Corp.'s (NYSE:AIR) CEO Compensation

Key Insights

• AAR to hold its Annual General Meeting on 17th of September
• Salary of US$1.05m is part of CEO John Holmes's total remuneration
• Total compensation is 684% above industry average
• AAR's total shareholder return over the past three years was 99% while its EPS was down 0.3% over the past three years

CEO John Holmes has done a decent job of delivering relatively good performance at AAR Corp. (NYSE:AIR) recently. This is something shareholders will keep in mind as they cast their votes on company resolutions such as executive remuneration in the upcoming AGM on 17th of September. However, some shareholders may still want to keep CEO compensation within reason.

Check out our latest analysis for AAR

How Does Total Compensation For John Holmes Compare With Other Companies In The Industry?

Our data indicates that AAR Corp. has a market capitalization of US$2.3b, and total annual CEO compensation was reported as US$7.9m for the year to May 2024. We note that's an increase of 17% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.1m.

On examining similar-sized companies in the American Aerospace & Defense industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$1.0m. Accordingly, our analysis reveals that AAR Corp. pays John Holmes north of the industry median. Moreover, John Holmes also holds US$24m worth of AAR stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	US$1.1m	US$1.0m	13%
Other	US$6.8m	US$5.7m	87%
Total Compensation	US$7.9m	US$6.7m	100%

Speaking on an industry level, nearly 26% of total compensation represents salary, while the remainder of 74% is other remuneration. It's interesting to note that AAR allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

AAR Corp.'s Growth

AAR Corp. saw earnings per share stay pretty flat over the last three years. In the last year, its revenue is up 16%.

Investors would be a bit wary of companies that have lower EPS On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has AAR Corp. Been A Good Investment?

We think that the total shareholder return of 99%, over three years, would leave most AAR Corp. 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.

In Summary...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, if the board proposes to increase the compensation, some shareholders might have questions given that the CEO is already being paid higher than the industry.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for AAR (1 is potentially serious!) that you should be aware of before investing here.

Important note: AAR is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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.