The AES Corporation (NYSE:AES) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. The upcoming AGM on 22 April 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
Comparing The AES Corporation's CEO Compensation With the industry
Our data indicates that The AES Corporation has a market capitalization of US$20b, and total annual CEO compensation was reported as US$11m for the year to December 2020. That's a modest increase of 5.9% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.2m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$221k. Accordingly, our analysis reveals that The AES Corporation pays Andres Ricardo Gluski Weilert north of the industry median. Furthermore, Andres Ricardo Gluski Weilert directly owns US$36m 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. AES 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.
A Look at The AES Corporation's Growth Numbers
Over the last three years, The AES Corporation has shrunk its earnings per share by 4.7% per year. It saw its revenue drop 5.2% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has The AES Corporation Been A Good Investment?
Most shareholders would probably be pleased with The AES Corporation for providing a total return of 169% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 4 warning signs for AES (1 is concerning!) that you should be aware of before investing here.
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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