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We Think The Compensation For American Electric Power Company, Inc.'s (NASDAQ:AEP) CEO Looks About Right

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Simply Wall St
·3-min read
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CEO Nick Akins has done a decent job of delivering relatively good performance at American Electric Power Company, Inc. (NASDAQ:AEP) recently. As shareholders go into the upcoming AGM on 20 April 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. Here is our take on why we think the CEO compensation looks appropriate.

See our latest analysis for American Electric Power Company

Comparing American Electric Power Company, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that American Electric Power Company, Inc. has a market capitalization of US$43b, and reported total annual CEO compensation of US$16m for the year to December 2020. That's just a smallish increase of 7.0% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.5m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$15m. So it looks like American Electric Power Company compensates Nick Akins in line with the median for the industry. Furthermore, Nick Akins directly owns US$12m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

US$1.5m

US$1.5m

10%

Other

US$14m

US$13m

90%

Total Compensation

US$16m

US$14m

100%

Speaking on an industry level, nearly 13% of total compensation represents salary, while the remainder of 87% is other remuneration. American Electric Power Company pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

American Electric Power Company, Inc.'s Growth

American Electric Power Company, Inc.'s earnings per share (EPS) grew 4.5% per year over the last three years. In the last year, its revenue is down 4.1%.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 American Electric Power Company, Inc. Been A Good Investment?

Most shareholders would probably be pleased with American Electric Power Company, Inc. for providing a total return of 39% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. However, we still think that any proposed increase in CEO compensation will be examined closely to make sure the compensation is appropriate and linked to performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which doesn't sit too well with us) in American Electric Power Company we think you should know about.

Switching gears from American Electric Power Company, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.