Company: AAOI
Filing Date: 2025-03-10
Form Type: DEF 14A
Source: 0001104659-25-022149
Chunk: 31

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-03-10
Form: DEF 14A
Chunk 31
---
 provides evaluations of the performance of the other executive officers and makes recommendations regarding changes to executive officer compensation (other than for himself), the broader Company-wide cash incentive plan, and budgets for equity awards. Our Chief Financial Officer provides information and recommendations regarding our annual corporate operating budget and the related performance goals for our equity and cash incentive programs. Our in-house legal team, including our Chief Legal Officer, provides additional guidance as requested by the compensation committee. Finally, the benefits committee, consisting of members of our human resources, legal, and accounting departments, provides guidance to the compensation committee on broad-based health, welfare and retirement benefit plans and

20

TABLE OF CONTENTS

proposed changes to those plans. Our officers recuse themselves from discussions and recommendations regarding their own compensation. Role of Compensation Consultant The compensation committee retained Aon to assist with establishing an updated peer group for 2024 and to perform benchmarking for executive officer and director compensation. Aon reported directly to the compensation committee and to the compensation committee chair. While Aon coordinated with our management for data collection, including for obtaining the job descriptions for our executive officers, Aon did not provide any other compensation related services to us. The compensation committee evaluated Aon’s independence pursuant to the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) and the relevant SEC rules and determined Aon was independent and that no conflict of interest arose as a result of the work performed by Aon. Competitive Positioning For purposes of comparing the compensation of our NEOs against the competitive market, the compensation committee periodically reviews and considers the compensation levels and practices of a group of peer companies. This compensation peer group consists of companies within the industry with a similar size profile in terms of revenue and market capitalization. In the third quarter of 2023, the compensation committee assessed the appropriateness of the peer group to ensure it was aligned with the Company’s profile. Due to a significant increase in the Company’s valuation, as well as increases in revenues and headcount, the compensation committee approved changes to the peer group. The following criteria were used to establish the 2024 peer group: • Industry: Focus on companies within the communications equipment industry and other similar technology hardware companies, including semiconductors and systems software companies; • Market capitalization: Focus on companies with market capitalizations of $150 million to $1.2 billion based on the Company’s market capitalization of approximately $500 million at the time; represented a range of approximately 0.3x to 3x the