LEUCADIA NATIONAL CORPORATION (NASDAQ:LUK) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item5.02.Compensatory Arrangements of Certain Officers.
The Compensation Committee of the Leucadia Board of Directors
approved an executive-compensation plan (the 2017 Plan) for Rich
Handler, our CEO, and Brian Friedman, our President (together,
our Executives), for compensation year 2017 that is identical to
the plan that the Committee approved in 2016 and is based upon
performance metrics achieved over a three-year period from 2017
through 2019. As did the 2016 plan, the 2017 Plan aligns our
executive compensation with the interests of our long-term
shareholders. With the exception of base salaries, the 2017 Plan
is 50% performance based.
The Compensation Committee determined to eliminate cash incentive
bonuses for 2017 as it did in 2016. 50% of each of our CEO and
Presidents 2017 compensation beyond their base salaries will be
composed entirely of performance-based restricted stock units
(RSUs) to be granted in January 2017 that will vest at the
beginning of 2020. To further align executive compensation with
shareholder interests, any vested RSUs will be subject to a
post-vesting, three-year holding period such that no vested RSUs
can be sold or transferred until January 2023.
The Compensation Committee selected the 2017 Plans performance
criteria and vesting thresholds after taking into account, among
other things, Leucadias performance, the long-term nature of the
Companys strategy, our shareholders feedback, Leucadias peers,
the annual cash incentive and long-term equity grants that had
historically been awarded to our Executives at Leucadia and
Jefferies, the multiple roles fulfilled by our Executives, and
that our Executives do not have and have never had employment or
severance agreements.
When finally approved and granted in January 2017, the RSUs will
have the following performance conditions and required holding
period:
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Performance Metrics: The equity incentive under the Plan will be based equally on the compound growth rates of Leucadias total shareholder return (TSR), which will be measured from the close on the last trading day of December 2016 and Leucadias Return on Tangible Deployable Equity (ROTDE), the annual, two- and three-year results of which will be used to determine vesting. TSR is the annualized rate of return reflecting price appreciation plus reinvestment of dividends and distributions to shareholders and the compounding effect of dividends paid and distributions on reinvested dividends and distributions over each measurement period. ROTDE is net income adjusted for amortization of intangible assets divided by tangible book value at the beginning of the year adjusted for intangible assets and deferred tax assets. ROTDE, an adjusted return-on-equity measurement, was chosen to appropriately measure our Executives performance against the actual tangible equity that is or can be allocated and invested, and from which earnings can be generated. |
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Performance Targets and Thresholds: If |
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receive up to an additional 50% in incentive compensation |
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Weighting: When determining whether RSUs will vest, the calculation will be weighted equally between TSR and ROTDE. For example, if TSR growth was below minimum thresholds, but ROTDE growth was above minimum thresholds, our Executives would still be eligible to receive some number of vested RSUs based on ROTDE growth. |
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Performance Vesting Mechanism: Although no RSUs will vest until the beginning of 2020, portions of the overall awards may be banked for each executive each year based upon that years TSR and ROTDE growth (for example, if growth rates in both TSR and ROTDE equaled 8% in 2017, our Executives would be eligible to bank one-third of their targeted incentive compensation, but those RSUs would not vest until the beginning of 2020). Any RSUs that have not been banked during each measuring period over 2017 and 2018 will remain available to vest if two- or three-year growth rates meet or exceed thresholds. The total potential vested RSUs will equal the greater of (a)the sum of all banked RSUs for each of 2017 and 2018 and (b)potential vested RSUs based upon the three-year growth rates. |
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Holding Period Mandates No Sales or Transfers for Six Years until 2023: RSUs will not be eligible to vest until the beginning of 2020 and will be subject to forfeiture if the executive resigns or is terminated for cause. Our Executives cannot sell or otherwise transfer vested RSUs until January 2023. |
