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 funds from operations and shareholder returns of the company.
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$1.9b, and total annual CEO compensation was reported as US$3.8m for the year to December 2019. That's a slightly lower by 4.0% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$546k.
On comparing similar companies from the same industry with market caps ranging from US$1.0b to US$3.2b, we found that the median CEO total compensation was US$4.6m. So it looks like American Assets Trust compensates Ernest Rady in line with the median for the industry. Furthermore, Ernest Rady directly owns US$188m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. Although there is a difference in how total compensation is set, American Assets Trust more or less reflects the market in terms of setting the salary. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
American Assets Trust, Inc.'s Growth
American Assets Trust, Inc.'s funds from operations (FFO) grew 32% per yearover the last three years. In the last year, its revenue is up 3.7%.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Moving away from current form for a second, 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?
With a three year total loss of 27% for the shareholders, American Assets Trust, Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, American Assets Trust pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, shareholder returns paint a sorry picture for the company, finishing in the red over the last three years. But on the bright side, FFO growth is positive over the same period. Considering positive FFO growth, we'd say compensation is fair, but shareholders may be wary of a bump in pay before the company logs positive returns.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 2 warning signs for American Assets Trust you should be aware of, and 1 of them is a bit unpleasant.
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.
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