Shareholders May Be Wary Of Increasing Apple Hospitality REIT, Inc.'s (NYSE:APLE) CEO Compensation Package

The results at Apple Hospitality REIT, Inc. (NYSE:APLE) have been quite disappointing recently and CEO Justin Knight bears some responsibility for this. At the upcoming AGM on 13 May 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Apple Hospitality REIT

How Does Total Compensation For Justin Knight Compare With Other Companies In The Industry?

At the time of writing, our data shows that Apple Hospitality REIT, Inc. has a market capitalization of US$3.5b, and reported total annual CEO compensation of US$3.9m for the year to December 2020. Notably, that's a decrease of 15% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$494k.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$5.4m. So it looks like Apple Hospitality REIT compensates Justin Knight in line with the median for the industry. What's more, Justin Knight holds US$23m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	US$494k	US$525k	13%
Other	US$3.4m	US$4.1m	87%
Total Compensation	US$3.9m	US$4.6m	100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. It's interesting to note that Apple Hospitality REIT 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.

Apple Hospitality REIT, Inc.'s Growth

Over the last three years, Apple Hospitality REIT, Inc. has shrunk its funds from operations (FFO) by 67% per year. It saw its revenue drop 52% over the last year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Apple Hospitality REIT, Inc. Been A Good Investment?

With a three year total loss of 3.7% for the shareholders, Apple Hospitality REIT, Inc. would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Apple Hospitality REIT that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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