Increases to Diodes Incorporated's (NASDAQ:DIOD) CEO Compensation Might Cool off for now

Key Insights

• Diodes will host its Annual General Meeting on 29th of May
• CEO Keh-Shew Lu's total compensation includes salary of US$805.8k
• The total compensation is 32% higher than the average for the industry
• Diodes' EPS grew by 16% over the past three years while total shareholder loss over the past three years was 0.7%

In the past three years, shareholders of Diodes Incorporated (NASDAQ:DIOD) have seen a loss on their investment. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 29th of May. They could also influence management through voting on resolutions such as executive remuneration. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

See our latest analysis for Diodes

Comparing Diodes Incorporated's CEO Compensation With The Industry

According to our data, Diodes Incorporated has a market capitalization of US$3.3b, and paid its CEO total annual compensation worth US$9.5m over the year to December 2023. That's a modest increase of 4.8% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$806k.

On comparing similar companies from the American Semiconductor industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$7.2m. Hence, we can conclude that Keh-Shew Lu is remunerated higher than the industry median. What's more, Keh-Shew Lu holds US$28m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$806k	US$757k	8%
Other	US$8.7m	US$8.3m	92%
Total Compensation	US$9.5m	US$9.0m	100%

On an industry level, roughly 11% of total compensation represents salary and 89% is other remuneration. It's interesting to note that Diodes allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Diodes Incorporated's Growth

Over the past three years, Diodes Incorporated has seen its earnings per share (EPS) grow by 16% per year. It saw its revenue drop 25% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Diodes Incorporated Been A Good Investment?

Given the total shareholder loss of 0.7% over three years, many shareholders in Diodes Incorporated are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for Diodes (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.

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. 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.