Stifel Cuts CEO’s Compensation 6.9% to $5.4 Million
Stifel Financial Corp.’s chairman and chief executive officer told his board to cut his pay in 2016 to reflect business difficulties and “the fact that many Stifel employees were experiencing declines in total compensation,” according to the St. Louis-based company’s proxy statement.
The compensation committee listened, but few employees are likely crying for Ron Kruszewski.
The executive took home total compensation of $5.4 million in 2016, a 6.9% drop from his 2015 pay of $5.8 million, according to the document that St. Louis-based Stifel filed with the Securities and Exchange Commission on Tuesday evening.
Despite his nick in pay, the cash that Kruszewski took home last year soared as a result of a cash bonus his board approved of $2.25 million. Stifel’s compensation committee did not give him a cash bonus in 2015 because it wanted to emphasize so-called “at risk” compensation such as deferred stock awards to align executive pay with longer-term goals of shareholders, according to the proxy.
Kruszewski’s total 2016 comp package included 58% in “realized pay” — his cash bonus, the $200,000 salary he has earned since joining the company in 2017 and direct stock awards worth $700,000 on their grant date.
His 42% of at-risk compensation came from $1.5 million of restricted stock and debt that vest over five to ten years and $750,000 of deferred shares tied to Stifel’s hitting preset return on equity, pretax profit and earning-per-share goals over the next four years.
Kruszewski recommended compensation cuts for himself and four other senior executives to recognize the lower 2016 pay suffered by “many” of Stifel’s 7,000-plus employees, the “difficulty experienced in the operating businesses during 2016” and “the fact that, while normal operating metrics displayed strength, there had been an overall decline in the business that was offset by an increase in net-interest income,” according to the proxy statement.In other words, Stifel’s record 2016 net revenue of $2.6 billion, which jumped 11% from a year earlier, reflected rising Federal Reserve interest rates that were not controlled by management.
The company’s biggest business, its global wealth arm with 2,282 financial advisors, registered a 14% jump in net revenue to $1.6 billion and an operating profit rise of 13% from 2015 to $430 million.
The compensation committee also noted that the acquisition-hungry Kruszewski added $5.6 billion to the company’s balance sheet in 2016. The firm last year bought City Securities, a small Indiana broker-dealer, asset management firms Eaton Partners and ISM, and hired many of Barclays U.S. brokers.
Those were relatively modest purchases compared with Kruszewski’s 2013 acquisitions of investment bank Keefe, Bruyette & Woods and trading firm Knight Capital Markets and his 2011 purchases of investment bank Thomas Weisel Partners, muni bond firm Stone & Youngberg and bankruptcy specialist Miller Buckfire.
In justifying its compensation decision, the committee also noted that Stifel’s stock rose 18% in 2016 as Kruszewski reduced costs firm-wide and “led culture initiatives in partnership with senior leadership and Stifel’s regulators.” The proxy did not elaborate on the phraseology.
The committee also reduced the 2016 compensation of James M. Zemlyak, its chief financial officer who also oversees Stifel’s wealth management division. It dipped to $3.01 million from $3.2 million in 2015, including a cash bonus of $1.4 million.
Zemlyak’s accomplishments included leading the Stifel Nicolaus brokerage and overall Stifel wealth businesses to “strong performance with an essentially unchanged number of financial advisors,” maintaining performance while slightly reducing the wealth business’s ratio of compensation-to-revenue and selling the independent brokerage unit of Sterne Agee Financial Services, the Alabama-based retail brokerage firm Kruszewski bought in 2015 for $150 million, the compensation committee wrote in the proxy document.