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Is American Electric Power Company, Inc. (NYSE:AEP) Excessively Paying Its CEO?

Simply Wall St

In 2011 Nick Akins was appointed CEO of American Electric Power Company, Inc. (NYSE:AEP). This analysis aims first to contrast CEO compensation with other large companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for American Electric Power Company

How Does Nick Akins's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that American Electric Power Company, Inc. has a market cap of US$47b, and reported total annual CEO compensation of US$12m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.4m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

So Nick Akins is paid around the average of the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.

You can see a visual representation of the CEO compensation at American Electric Power Company, below.

NYSE:AEP CEO Compensation, March 11th 2020

Is American Electric Power Company, Inc. Growing?

Over the last three years American Electric Power Company, Inc. has grown its earnings per share (EPS) by an average of 28% per year (using a line of best fit). In the last year, its revenue is down 3.9%.

This shows that the company has improved itself over the last few years. Good news for shareholders. While it would be good to see revenue growth, profits matter more in the end. 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?

I think that the total shareholder return of 57%, over three years, would leave most American Electric Power Company, Inc. shareholders smiling. 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.

In Summary...

Nick Akins is paid around what is normal for the leaders of larger companies.

The company is growing earnings per share and total shareholder returns have been pleasing. Although the pay is a normal amount, some shareholders probably consider it fair or modest, given the good performance of the stock. Looking into other areas, we've picked out 1 warning sign for American Electric Power Company that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.