Jefferies Financial
Annual Meeting April 17
The total disclosed pay for Jeffries Financial CEO Richard B. Handler of $9,231,958 is lower this year than last year because his stock awards are awarded triennially. However, his cash compensation increased. In addition to his salary of $1 million, he received a non-equity incentive (NEIC) plan award of $4,500,000 and a bonus of $3,250,000. I believe his bonus appeared in that column because it did not meet the SEC’s requirements that it be performance-linked and not discretionary to appear in the NEIC column.
The company continues to have two executives paid basically at the CEO level, an unusual and frowned upon practice. President Brian Friedman received all the same cash payments as Handler did.
The Compensation Committee set an annual bonus target on Return on Tangible Deployable Equity (ROTDE), a somewhat unusual and quite complex measurement, with a targeted cash bonus of $6.5 million for an ROTDE of 9%, and a $3.25 million bonus for an ROTDE of 6%. The actual ROTDE figure was 5.89%, but the compensation committee used its discretion to award the $3.25 million bonus anyway. The company noted that one of the “drags on 2019 ROTDE was the completely unanticipated and dramatic pre-tax $182.3 million non-cash charge in our Merchant Banking holdings in WeWork.” The question of whether WeWork’s valuation crash was completely unanticipated has been worked to death. The principle remains, however, that the target was not met and the bonus was awarded in any case.
Handler was number three in As You Sow’s list of the 100 Most Overpaid CEOs. In 2018, the company received one of the lowest levels of support for CEO compensation of S&P 500 companies with a staggering 48.8% of votes cast against. The company responded with a number of changes, including adopting some relative TSR requirements to equity (though it appears the equity can be awarded even if the company performs at less than the 50th percentile of peers). Yet, the improvements satisfied many shareholders. Last year, 14.4% of shareholders voted against the compensation plan, a still fairly high level of opposition.
One reason cited by those shareholders were the excessive perquisites that the company continues to offer, including personal use of company aircraft. The company’s defense strikes me as tone-deaf. For example, Jefferies Financial claims that executives need “chauffeured cars, paid parking, and vehicle-related expenses for business as well as personal use also to assure their constant availability and responsiveness, and to facilitate their productivity.” Many of us have found that cell phones also work for these purposes.