Fred Chang
Senior Vice President and North America General Manager at AAOI
Executive
About Fred Chang
Hung-Lun (Fred) Chang, age 61, is Senior Vice President and North America General Manager at Applied Optoelectronics (AAOI), a role he has held since October 2012; he joined AAOI in 2001 and previously led the Optical Module Division (2004–2012), manufacturing (2002–2004), and packaging (2001–2002). He holds a B.S. in Electrophysics and a Ph.D. in Electro-Optical Engineering from National Chiao Tung University (Taiwan) . Company performance context for incentive alignment: 2024 cumulative TSR measured as $100 initial investment reached $310.27 vs. peer group $123.89, while 2024 Non-GAAP EBITDA was -$30.216 million and GAAP net loss was -$194.415 million, framing the mix of strong equity performance and ongoing profitability improvement focus .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Applied Optoelectronics (AAOI) | Senior VP & North America GM | 2012–present | Leads North America operations and Optical Component BU |
| Applied Optoelectronics (AAOI) | VP, Optical Module Division | 2004–2012 | Scaled optical modules product leadership |
| Applied Optoelectronics (AAOI) | Director of Manufacturing | 2002–2004 | Drove manufacturing execution |
| Applied Optoelectronics (AAOI) | Deputy Packaging Manager | 2001–2002 | Packaging/process development |
| Hon Hai Precision Industry (Foxconn) | Deputy Manager, Optical Active Component Group | 2000–2001 | Component operations in Taiwan |
| Chunghwa Telecom | Researcher & Project Manager, Optoelectronic Module Technology Group | 1996–2000 | R&D and productization in optoelectronics |
External Roles
- None disclosed (no current public company directorships in executive biography) .
Fixed Compensation
- 2024 base salary rate: $381,753 (effective March 1, 2024; +12% YoY) . Actual 2024 salary paid (includes PTO and standard payroll): $404,039 .
- 2024 target annual cash bonus: 50% of base salary (restored from 45.83% in 2023 to align near 50th percentile) .
Multi-year compensation (total company-reported):
| Metric (USD) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary | $352,976 | $350,169 | $404,039 |
| Stock Awards (grant date fair value) | $303,926 | $1,517,260 | $683,234 |
| Non-Equity Incentive Plan Compensation | $177,777 | $179,657 | $119,298 |
| All Other Compensation | $13,414 | $17,156 | $20,726 |
| Total | $848,093 | $2,064,242 | $1,227,297 |
Performance Compensation
2024 Annual Cash Incentive design and outcome:
- Metrics: Non-GAAP EBITDA (50% weight) and New Customer Orders (50% weight) .
- Company achievement: EBITDA below minimum (0% for that component); New Customer Orders at maximum (3+ new customers with ≥$1M orders) yielding 62.5% aggregate payout of target .
- Fred Chang actual 2024 bonus: $119,298 on $190,876 target (62.5%) .
| Metric | Weight | Threshold | Target | Maximum | 2024 Outcome | Weighted Result |
|---|---|---|---|---|---|---|
| Non-GAAP EBITDA | 50% | Losses ≤$8.0m | Losses ≤$2.0m | ≥Breakeven | Losses >$8.0m (no payout) | 0% |
| New Customer Orders | 50% | 1 new customer ≥$1m | 2 new customers ≥$1m | 3 new customers ≥$1m | Achieved ≥3 | 62.5% |
| Aggregate payout | — | — | — | — | — | 62.5% |
Long-Term Incentives (2024 cycle):
- Mix: 50% time-vesting RSUs and 50% PSUs (target) .
- Grants (approved April 29, 2024; value converted to shares on 30-day average price): RSUs $325,000; PSUs $325,000 .
- 2024 share grants: RSUs 25,671; PSUs target 25,671 .
- RSU vesting: Quarterly over 4 years commencing January 21, 2024 (service-based) .
- PSU performance period and metrics: 3-year ending April 29, 2027; 50% relative TSR vs 2024 peer group (25th/50th/75th percentiles = 25%/100%/200% payout) and 50% stock price CAGR hurdles ($13.87/5%, $15.95/10%, $20.70/20%) with 0–200% payout .
Historical PSU settlement:
- 2021–2024 PSU cycle paid at maximum (200%); Fred Chang earned 80,910 PSUs; due to plan share limits, portion settled in cash .
Vesting/realization in 2024:
| 2024 Equity Realization | Shares | Value |
|---|---|---|
| Shares vested (stock awards) | 119,915 | $1,540,899 |
| Options exercised | — | — |
Equity Ownership & Alignment
- Beneficial ownership (as of April 17, 2025): 108,085 common shares; plus 17,627 RSUs vesting within 60 days; ownership <1% of outstanding .
- Outstanding unvested awards at 12/31/2024:
- RSUs by grant year: 7,586 (2021) $279,620; 3,739 (2021) $137,820; 22,322 (2022) $822,789; 63,056 (2023) $2,324,244; 20,858 (2024) $768,826 (values at $36.86) .
- PSUs (target, unearned): 25,671 units; $946,233 (at $36.86) .
- Stock ownership guidelines: Senior Vice President = 2x annual base salary; all executives in compliance; February 2025 amendment clarified unexercised options and unvested PSUs do not count toward guideline .
- Hedging/pledging: Prohibited by policy (no short sales, derivatives, hedging, margin or pledging) .
- Clawback: Dodd-Frank-compliant Incentive Compensation Recovery Policy adopted in 2023 .
Security ownership snapshot:
| Holder | Shares Beneficially Owned | % Outstanding |
|---|---|---|
| Hung-Lun (Fred) Chang | 108,085; plus 17,627 RSUs vesting within 60 days (excluded from others’ calc) | * (<1%) |
Employment Terms
- Employment: At-will with severance protections .
- Outside Change of Control (CoC) severance (termination without Cause or for Good Reason): 50% of base salary + 50% of target bonus + $15,000 lump sum (COBRA/other) . Modeled amount at 12/31/2024: Salary+Bonus $286,315; Other Cash $15,000 .
- Within CoC period (double-trigger: termination without Cause or for Good Reason in 6 months pre- or 12 months post-CoC): 1x base salary + 1x target bonus + $15,000; full acceleration of equity; options exercisable for extended period . Modeled amount at 12/31/2024: Salary+Bonus $531,727; Other Cash $15,000; plus equity acceleration valued $17,216,334 .
- Non-compete: 12 months post-termination; release and 6-month cooperation required for severance; mutual non-disparagement .
- Acceleration mechanics for RSUs/PSUs: death/disability full RSU vesting; PSU treatment varies (relative TSR portion at target on death/disability; CoC settlement on greater of actual/target for TSR; stock-price PSU vests to extent earned and continues to be measured) .
| Scenario (12/31/2024) | Salary+Bonus | Other Cash | Accelerated Equity |
|---|---|---|---|
| Termination without Cause / Good Reason (outside CoC) | $286,315 | $15,000 | — |
| Termination without Cause / Good Reason (within CoC period) | $531,727 | $15,000 | $17,216,334 |
| Death or Disability | — | — | $15,899,895 |
| Retirement | — | — | $11,304,301 |
| CoC – awards not assumed | — | — | $15,637,600 |
Compensation Structure Notes
- 2024 target bonus percentages restored (post-2023 cuts) to align near 50th percentile market data; target bonus for SVPs set at 50% of salary .
- LTI is balanced 50% PSUs/50% RSUs with rigorous 3-year goals (relative TSR and stock price CAGR) to align with shareholder value; no stock options currently granted .
- Say-on-pay approval: 90.17% support at 2024 annual meeting, indicating investor alignment with the program .
- Compensation committee and advisor: Independent committee; Aon retained; six meetings in 2024; no advisor conflicts .
- Peer group for 2024 benchmarking (selected tech/comms hardware names such as A10 Networks, Semtech, SkyWater, etc.); program generally targets around the 50th percentile considering performance and retention needs .
Performance & Track Record
- Company TSR and profitability context used in pay decisions: 2024 TSR $310.27 vs peer $123.89; GAAP net loss -$194,415k; Non-GAAP EBITDA -$30,216k; compensation committee weighted New Customer Orders heavily and achieved maximum on that KPI, leading to a 62.5% cash bonus payout for 2024 .
Investment Implications
- Pay-for-performance alignment: Equity-heavy design (PSUs tied to multi-year TSR and price hurdles) supports alignment; 2021–2024 PSU max payout underscores strong share performance realization, while EBITDA and net income remain focal areas for improvement, indicating continued use of operational metrics in bonuses .
- Retention vs selling pressure: Quarterly RSU vesting plus significant PSU outcomes can create periodic liquidity events (119,915 shares vested in 2024 for Chang), but strict anti-hedging/pledging policy and ownership guidelines mitigate misalignment risk .
- Change-of-control economics: Double-trigger structure with full equity acceleration during CoC period meaningfully increases realized value only upon both a transaction and qualifying termination; outside CoC severance is moderate (0.5x salary and bonus), balancing retention and cost .
- Governance signals: Strong say-on-pay support, independent comp committee, and clawback policy indicate responsive governance; use of a refreshed peer group and mid-market targeting helps manage pay inflation risk while supporting retention in a competitive optics/semis talent market .