Jefferies Financial Group reveals amendments to incentive compensation plan

Maria Nikolova

Jefferies has raised its Return on Tangible Deployable Equity (ROTDE) performance ranges from a 5% threshold and 8% target to a 6% threshold and 9% target.

Jefferies Financial Group Inc (NYSE:JEF), formerly known as Leucadia National Corporation, has earlier today posted a SEC filing revealing details about amendments to its incentive compensation plan.

Following Jefferies’ 2018 annual meeting, the Compensation Committee engaged with fellow shareholders to solicit feedback on its executive compensation program. Based on the feedback, the Compensation Committee amended the program to address each of the issues raised by the shareholders.

With regards to the short-term incentive plan, the company explains that it raised its Return on Tangible Deployable Equity (ROTDE) performance ranges from a 5% threshold and 8% target to a 6% threshold and 9% target. This results in a nearly 17% decrease in performance-based awards for 2018, 2019 and 2020.

Further, Jefferies replaced the three-year cash award with a single-year award based on ROTDE performance for 2019 and 2020 and reduced targeted cash by $2.5 million to $6.5 million (this means a reduction of 28%).

Also, if Jefferies’ executives generate ROTDE of at least 12%, that is, if they grow tangible deployable equity by about $1 billion, they can earn up to 1.75x of targeted cash compensation.

Regarding its long-term incentive plan, Jefferies explains that it raised its Total Shareholder Return (TSR) performance ranges from a 5% threshold and 8% target to a 6% threshold and 9% target, which results in a nearly 17% drop in performance-based awards for 2018, 2019 and 2020.

Jefferies has eliminated banking, so no equity awards can be earned unless compound annual TSR performance over a three-year measurement period is greater than 6%.

The Group has implemented a relative TSR performance threshold starting in the current year:

  • If three-year compounded TSR is <50th percentile of Jefferies Financial Group’s peers, its executives will receive no additional equity compensation above target no matter how high Jefferies Financial Group’s three-year compounded TSR might be.

  • If three-year compounded TSR is equal or bigger than 50th percentile of Jefferies Financial Group’s peers, the Group’s executives will be eligible to receive an additional 1.5% of target compensation for each 1 point increase in the Group’s relative TSR ranking.

Finally, the Group says it reduced the overall targeted compensation this year and next year by 10%.

As a result of the 2018 Plan amendments and the TSR, the current estimated value of the 2018 Plan is $14 million, markedly lower than the $26 million initially targeted.

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