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How Should Investors Feel About AvalonBay Communities, Inc.'s (NYSE:AVB) CEO Pay?

Tim Naughton became the CEO of AvalonBay Communities, Inc. (NYSE:AVB) in 2012. This analysis aims first to contrast CEO compensation with other large companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for AvalonBay Communities

How Does Tim Naughton's Compensation Compare With Similar Sized Companies?

According to our data, AvalonBay Communities, Inc. has a market capitalization of US$30b, and paid its CEO total annual compensation worth US$10m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be 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).

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So Tim Naughton is paid around the average of the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

The graphic below shows how CEO compensation at AvalonBay Communities has changed from year to year.

NYSE:AVB CEO Compensation, October 11th 2019
NYSE:AVB CEO Compensation, October 11th 2019

Is AvalonBay Communities, Inc. Growing?

Over the last three years, AvalonBay Communities, Inc. has not seen its earnings per share change much, though they have deteriorated slightly, according to a line of best fit. It achieved revenue growth of 2.1% over the last year.

The lack of earnings per share growth in the last three years is unimpressive. The fairly low revenue growth fails to impress given that the earnings per share is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.

Has AvalonBay Communities, Inc. Been A Good Investment?

Most shareholders would probably be pleased with AvalonBay Communities, Inc. for providing a total return of 43% 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...

Remuneration for Tim Naughton is close enough to the median pay for a CEO of a large company .

We're not seeing great strides in earnings per share, but the company has clearly pleased some investors, given the returns over the last three years. So we can't see a reason to suggest the pay is inappropriate. So you may want to check if insiders are buying AvalonBay Communities shares with their own money (free access).

If you want to buy a stock that is better than AvalonBay Communities, this free list of high return, low debt companies is a great place to look.

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.

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. Thank you for reading.