It's Unlikely That Applied Optoelectronics, Inc.'s (NASDAQ:AAOI) CEO Will See A Huge Pay Rise This Year

Shareholders of Applied Optoelectronics, Inc. (NASDAQ:AAOI) will have been dismayed by the negative share price return over the last three years. Per share earnings growth is also poor, despite revenues growing. The AGM coming up on 03 June 2021 will be an opportunity for shareholders to have their concerns addressed by the board and for them to exercise their influence on management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders might be hesitant about approving a raise at the moment.

Check out our latest analysis for Applied Optoelectronics

Comparing Applied Optoelectronics, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Applied Optoelectronics, Inc. has a market capitalization of US$216m, and reported total annual CEO compensation of US$2.8m for the year to December 2020. That's a notable decrease of 31% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$536k.

For comparison, other companies in the same industry with market capitalizations ranging between US$100m and US$400m had a median total CEO compensation of US$764k. Hence, we can conclude that Thompson Lin is remunerated higher than the industry median. Moreover, Thompson Lin also holds US$4.4m worth of Applied Optoelectronics stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	US$536k	US$520k	19%
Other	US$2.3m	US$3.6m	81%
Total Compensation	US$2.8m	US$4.1m	100%

On an industry level, around 23% of total compensation represents salary and 77% is other remuneration. Applied Optoelectronics sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Applied Optoelectronics, Inc.'s Growth

Over the last three years, Applied Optoelectronics, Inc. has shrunk its earnings per share by 88% per year. Its revenue is up 37% over the last year.

Investors would be a bit wary of companies that have lower EPS On the other hand, the strong revenue growth suggests the business is growing. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Applied Optoelectronics, Inc. Been A Good Investment?

With a total shareholder return of -83% over three years, Applied Optoelectronics, Inc. shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The company's earnings haven't grown and possibly because of that, the stock has performed poorly, resulting in a loss for the company's shareholders. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

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 4 warning signs for Applied Optoelectronics that investors should think about before committing capital to this 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. 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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