Increases to CEO Compensation Might Be Put On Hold For Now at Advanced Micro Devices, Inc. (NASDAQ:AMD)

Key Insights

• Advanced Micro Devices' Annual General Meeting to take place on 8th of May
• CEO Lisa Su's total compensation includes salary of US$1.20m
• The total compensation is 55% higher than the average for the industry
• Advanced Micro Devices' EPS declined by 34% over the past three years while total shareholder return over the past three years was 88%

Despite strong share price growth of 88% for Advanced Micro Devices, Inc. (NASDAQ:AMD) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 8th of May. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

See our latest analysis for Advanced Micro Devices

How Does Total Compensation For Lisa Su Compare With Other Companies In The Industry?

At the time of writing, our data shows that Advanced Micro Devices, Inc. has a market capitalization of US$233b, and reported total annual CEO compensation of US$30m for the year to December 2023. That's mostly flat as compared to the prior year's compensation. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.2m.

On comparing similar companies in the American Semiconductor industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$20m. Hence, we can conclude that Lisa Su is remunerated higher than the industry median. Furthermore, Lisa Su directly owns US$561m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	US$1.2m	US$1.1m	4%
Other	US$29m	US$29m	96%
Total Compensation	US$30m	US$30m	100%

On an industry level, around 11% of total compensation represents salary and 89% is other remuneration. A high-salary is usually a no-brainer when it comes to attracting the best executives, but Advanced Micro Devices paid Lisa Su a nominal salary to the CEO over the past 12 months, instead focusing on non-salary compensation. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Advanced Micro Devices, Inc.'s Growth

Over the last three years, Advanced Micro Devices, Inc. has shrunk its earnings per share by 34% per year. Its revenue is down 1.2% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Advanced Micro Devices, Inc. Been A Good Investment?

Boasting a total shareholder return of 88% over three years, Advanced Micro Devices, Inc. has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Advanced Micro Devices prefers rewarding its CEO through non-salary benefits. Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 1 warning sign for Advanced Micro Devices that investors should look into moving forward.

Important note: Advanced Micro Devices 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.