Is Atlantic American Corporation (NASDAQ:AAME) Overpaying Its CEO?

Simply Wall St
May 25, 2020

In 1995, Hilton Howell was appointed CEO of Atlantic American Corporation (NASDAQ:AAME). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Atlantic American

How Does Hilton Howell's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Atlantic American Corporation has a market cap of US$40m, and reported total annual CEO compensation of US$1.3m for the year to December 2019. We note that's an increase of 21% above last year. While we always look at total compensation first, we note that the salary component is less, at US$500k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$596k.

Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Atlantic American. Speaking on an industry level, we can see that nearly 18% of total compensation represents salary, while the remainder of 82% is other remuneration. It's interesting to note that Atlantic American pays out a greater portion of remuneration through salary, in comparison to the wider industry.

It would therefore appear that Atlantic American Corporation pays Hilton Howell more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see a visual representation of the CEO compensation at Atlantic American, below.

NasdaqGM:AAME CEO Compensation May 25th 2020

Is Atlantic American Corporation Growing?

Atlantic American Corporation has reduced its earnings per share by an average of 85% a year, over the last three years (measured with a line of best fit). It saw its revenue drop 8.7% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Atlantic American Corporation Been A Good Investment?

Given the total loss of 48% over three years, many shareholders in Atlantic American Corporation are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared total CEO remuneration at Atlantic American Corporation with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

Neither earnings per share nor revenue have been growing sufficiently to impress us, over the last three years. Arguably worse, investors are without a positive return for the last three years. And we'd be remiss not to note that the CEO remuneration has increased on last year. This analysis suggests to us that the CEO is paid too generously! Shifting gears from CEO pay for a second, we've spotted 3 warning signs for Atlantic American you should be aware of, and 1 of them is potentially serious.

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.

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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. Thank you for reading.

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