UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a) OF THESECURITIES EXCHANGE ACT OFof the
Securities Exchange Act of 1934
(AMENDMENT NO.___)Amendment No. )
Filed by the Registrantx¨
Filed by a Party other than the Registranto¨
Check the appropriate box:
| Preliminary Proxy Statement | ||||
| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||||
| x | Definitive Proxy Statement | |||
| Definitive Additional Materials | ||||
| Soliciting Material | ||||
JEFFERIES GROUP, INC. | ||||
| (Name of registrant as specified in its charter) | ||||
| (Name of person(s) filing proxy statement, if other than the registrant) | ||||
| Payment of Filing Fee (Check the appropriate box): | ||||
JEFFERIES GROUP, INC.
Payment of Filing Fee (Check the appropriate box):
| ¨ | No fee required | |||
| ¨ | ||||
| Fee computed on table below per Exchange Act Rules 14a-6(i) | ||||
| (1) | Title of each class of securities to which transaction applies: | |||
| (2) | Aggregate number of securities to which transaction applies: | |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
| (4) | Proposed maximum aggregate value of transaction: | |||
| (5) | Total fee paid: | |||
| Fee paid previously with preliminary materials. | ||||
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||
| (1) | Amount Previously Paid: | |||
| (2) | Form, Schedule or Registration Statement No.: | |||
| (3) | Filing Party: | |||
| (4) | Date Filed: | |||
520 Madison Avenue
New York, New York 10022
Monday, May 18, 2009
Dear Shareholder:
You are invited to attend our Annual Meeting of Shareholders. The meeting will be held at our offices at 520 Madison Avenue, New York, New York, 10022, on Monday, May 18, 2009,7, 2012, at 9:30 a.m. At the meeting, we will:
| 1. | Elect eight directors to serve until our next Annual Meeting, |
| 2. | Ratify the selection of our independent registered public accounting firm, and |
| 3. | Conduct any other business that properly comes before the meeting. |
You are entitled to notice of the meeting and to vote at the meeting if you held our common stock at the close of business on March 30, 2009.
Even if you will not be able to attend, we have taken a number of steps to make it easy for you to vote. The enclosed proxy card contains instructions on how to vote by telephone, on the Internetinternet or by mail. We urge you to vote early using one of these methods if you do not expect to attend. You can still attend the meeting and vote in person if you choose.
We have provided this Proxy Statement to provide background information for you to use when casting your vote. We hope you will find it informative.
| For the Board of Directors, |
| Michael J. Sharp |
| Secretary |
March 28, 2012
520 Madison Avenue
New York, New York 10022
The Board of Directors of Jefferies Group, Inc. requests that each shareholder provide a proxy for use at our Annual Meeting of Shareholders. The meeting will be held at our principal executive offices at 520 Madison Avenue, New York, New York, 10022, on Monday, May 18, 2009,7, 2012, at 9:30 a.m., local time. You are entitled to receive notice of the meeting and to vote at the meeting if you were a shareholder of record at the close of business on March 30, 2009.9, 2012. We are first mailing this Notice of Annual Meeting, Proxy Statement and proxy card to shareholders on or about April 9, 2009.
Eligible shareholders may vote by telephone, on the Internet,internet, by mail or by attending the meeting and voting by ballot as described below. If you vote by telephone or on the Internet,internet, you do not need to return a proxy card. Telephone and Internetinternet voting facilities will be available 24 hours a day, and will close at 11:59 p.m. on May 17, 2008,6, 2012, the night before the meeting.
To vote by telephone—please call 1-800-PROXIES(1-800-776-9437).
To vote on the Internet, internet—go towww.voteproxy.com and follow the on-screen instructions.
To vote by mail—simply mark the enclosed proxy, date and sign it, and return it to American Stock Transfer & Trust Company in the postage-paid envelope provided. If the envelope is missing, please mail the completed proxy card to us at:
Jefferies Group, Inc.
c/o American Stock Transfer & Trust Company
6201 15th15th Avenue
Brooklyn, NY11219-9821
We will use any votes received by telephone, internet or mail at the annual meeting and any adjournment of the meeting if an adjournment is necessary. If you change your mind after voting by telephone or on the Internet,internet, simply call the number again or return to the website again to change your vote. You may also revoke your vote, whether by telephone, internet or by mail, by (i) delivering a written notice of revocation to our Secretary on or before the closing of the polls at the meeting, (ii) delivering a new proxy card with a later date to our Secretary on or before the closing of the polls at the meeting or (iii) attending the meeting and voting in person. If your Jefferies shares are held for you in a brokerage, bank or other institutional account, you must obtain a proxy from that entity and bring it with you to hand in with your ballot in order to be able to vote your shares at the annual meeting.
If you indicate how you would like your shares voted by returning a proxy card, voting by telephone or voting on the Internet,internet, we will vote your shares at the meeting in accordance with your directions. If you do not indicate how you want your shares voted, but return a proxy card, your shares will be voted as follows:
FOR the election of the eight nominees for Director whose names are listed in this Proxy Statement, and
FOR ratification of the ratificationselection of our independent auditors. Ifregistered public accounting firm, and
if any other matters are properly raised at the meeting, your shares will be voted as directed by the persons named as proxies, Richard Handler, our Chief Executive Officer, or Brian P. Friedman, the Chairman of our Executive Committee.
Each person we list in this Proxy Statement as a nominee for Director has agreed to serve if elected. Although we expect that all the nominees will be able to serve if elected, if a nominee becomes unable to serve between now and the meeting date, we will vote any shares for which we have received proxies in favor of a substitute nominee recommended by our Board of Directors.
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We are paying for all costs associated with soliciting proxies from our shareholders. Although there are no formal agreements to do so, we will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses incurred in sending proxy materials and annual reports to our shareholders. In addition to solicitation by mail, our directors and officers may solicit proxies in person, by telephone, or by fax, but they will not receive special compensation for such solicitation.
On March 30, 2009,9, 2012, the record date for determining which shareholders are entitled to vote at the annual meeting, there were 169,194,358205,959,944 shares of our Common Stock outstanding. We do not have cumulative voting, and
The ratification of the appointment of KPMG as our independent auditor and any other item of business (other than the election of directors) properly brought before the annual meeting will be approved by the affirmative vote of holders of a majority of the shares present in person or by proxy and entitled to vote on the matter.
If your shares are held in your broker’s name and you do not give your broker timely voting instructions your broker can vote your shares forwith respect to the election of directors, butthe broker cannot vote your shares on certain other matters.shares. Such a broker “non-vote” will have no effect on the election of directors the ratification of our independent auditors or any other item properly raised at the meeting. Shares subject to a broker non-vote will nevertheless be present for purposes of determining a quorum. Abstentions will have the effect of a vote against the ratification of our independent auditors.
We have retained our transfer agent, American Stock Transfer & Trust Company, as independent inspector of election to receive and tabulate the votes. Our transfer agent will also certify the results and perform any other acts required by the Delaware General Corporation Law.
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The following table sets forth certain information regarding beneficial ownership of our common stock by
each person we know of who beneficially owns more than 5% of our common stock
each of our directors
each executive officer and former executive officer named in the Summary Compensation Table and
all directors and executive officers as a group
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The information set forth below is as of FebruaryJanuary 1, 2009,2012, unless otherwise indicated. The percentage beneficially owned in all cases is calculated using the number of outstanding shares at February 1, 2009. Information regarding shareholders other than directors and executive officers and employee benefit plans is based upon information contained in documents filed with the Securities and Exchange Commission (“SEC”). The number of shares beneficially owned by each shareholder and the percentage of the outstanding common stock those shares represent include shares that may be acquired by that shareholder within 60 days through the exercise of any option or right, but do not take into consideration the potential application of Section 409A of the Internal Revenue Code (the “Code”), which in some cases could result in a delay of the distribution beyond 60 days. Unless otherwise indicated, the mailing address of the parties listed below is our principal business address and the parties have sole voting power and sole dispositive power over their shares.
| Shares of Common | Percentage of | |||||||
| Stock Beneficially | Common Stock | |||||||
Name and Address of Beneficial Owner | Owned | Beneficially Owned | ||||||
| Leucadia National Corporation | 48,585,385 | (1) | 29.5 | % | ||||
| 315 Park Avenue South New York, New York 10010 | ||||||||
| Richard B. Handler | 11,015,771 | (2) | 6.4 | % | ||||
| Marsico Capital Management, LLC | 10,140,611 | (3) | 6.2 | % | ||||
| 1200 17th Street, Suite 1600 Denver, Colorado 80202 | ||||||||
| Earnest Partners, LLC | 8,296,315 | (4) | 5.0 | % | ||||
| 1189 Peachtree Street NE, Suite 2300 Atlanta, Georgia 30309 | ||||||||
| Jefferies Group, Inc. Employee Stock Ownership Plan | 6,501,190 | (5) | 4.0 | % | ||||
| Baron Capital Group, Inc. | 4,356,000 | (6) | 2.7 | % | ||||
| 767 Fifth Avenue New York, New York 10153 | ||||||||
| Brian P. Friedman | 3,033,323 | (7) | 1.8 | % | ||||
| Richard G. Dooley | 306,276 | (8) | * | |||||
| Lloyd H. Feller | 171,393 | (9) | * | |||||
| Peregrine C. Broadbent | 107,966 | (10) | * | |||||
| W. Patrick Campbell | 67,560 | (11) | * | |||||
| Charles Hendrickson | 35,742 | (12) | * | |||||
| Robert Joyal | 20,598 | (13) | * | |||||
| Joseph S. Steinberg | 5,479 | (14) | * | |||||
| Ian M. Cumming | 5,479 | (15) | * | |||||
| Michael T. O’Kane | 0 | (16) | * | |||||
| All directors and executive officers as a group | 14,769,587 | (17) | 8.6 | % | ||||
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percentage of Common Stock Beneficially Owned | ||||||
Leucadia National Corporation (“Leucadia”) 315 Park Avenue South New York, New York 10010 | 58,006,024 | (1) | 29.4 | % | ||||
Capital World Investors 333 South Hope Street Los Angeles, CA 90071 | 24,122,500 | (2) | 12.2 | % | ||||
BlackRock Inc. 40 East 52nd Street New York, NY 10022 | 14,482,322 | (3) | 7.3 | % | ||||
Richard B. Handler | 10,457,940 | (4) | 5.1 | % | ||||
Brian P. Friedman | 3,745,880 | (5) | 1.9 | % | ||||
Peregrine C. Broadbent | 302,373 | (6) | * | |||||
Richard G. Dooley | 268,062 | (7) | * | |||||
W. Patrick Campbell | 71,617 | (8) | * | |||||
Charles Hendrickson | 51,025 | (9) | * | |||||
Robert Joyal | 20,598 | (10) | * | |||||
Joseph S. Steinberg | 18,729 | (11) | * | |||||
Michael J. Sharp | 5,782 | (12) | * | |||||
Ian M. Cumming | 5,479 | (13) | * | |||||
Michael T. O’Kane | 0 | (14) | * | |||||
All directors and executive officers as a group | 14,947,485 | (15) | 7.3 | % | ||||
| * | The percentage of shares beneficially owned does not exceed one percent of the class. | |
| (1) | The indicated interest was reported on |
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| (2) | The indicated interest was reported on a Schedule 13G filed with the SEC by Capital World Investors on January 9, 2012. In its Schedule 13G, Capital World reported that as of December 30, 2011, it had sole voting and dispositive power over all 24,122,500 of its shares. |
| (3) | The indicated interest was reported on a Schedule 13G filed with the SEC by Blackrock, Inc. on January 20, 2012. In its Schedule 13G, Blackrock reported that as of December 31, 2011, it had sole voting and dispositive power over all 14,482,322 of its shares. |
| (4) | Assuming Mr. Handler’s continued employment with us through the expiration of all applicable vesting and deferral periods, Mr. Handler would beneficially own |
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reinvestments which Mr. Handler has a right to acquire within 60 days from | ||
| Beneficial | Sole Voting | Shared Voting | Sole Dispositive | Shared Dispositive | ||||||||||||||||
| Ownership | Power | Power | Power | Power | ||||||||||||||||
| BCG | 4,356,000 | 0 | 3,644,900 | 0 | 4,356,000 | |||||||||||||||
| BAMCO | 3,997,100 | 0 | 3,296,000 | 0 | 3,997,100 | |||||||||||||||
| BCM | 358,900 | 0 | 348,900 | 0 | 358,900 | |||||||||||||||
| Ronald Baron | 4,360,730 | 4,730 | 3,644,900 | 4,730 | 4,356,000 | |||||||||||||||
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| (5) | Assuming Mr. Friedman’s continued employment with us through the expiration of all applicable vesting and deferral periods, Mr. Friedman would beneficially own 5,138,466 shares (representing 2.61% of the currently outstanding class). The table above includes 911,514 vested RSUs which Mr. Friedman has a right to acquire within 60 days from January 1, 2012; 105,375 RSUs resulting from dividend reinvestments which Mr. Friedman has a right to acquire within 60 days from January 1, 2012; 1,303 shares held under the ESOP; and 12,528 shares held by the trustee of the PSP. The table above excludes 1,392,586 unvested RSUs which do not represent a right to acquire shares within 60 days from |
| (6) | Assuming the expiration or termination of all applicable vesting and deferral periods, Mr. Broadbent would beneficially own 355,600 shares (representing less than 1% of the currently outstanding class). The table above includes 212,908 vested |
Assuming the expiration of all applicable deferral periods, Mr. Dooley would beneficially own |
Assuming the expiration or termination of all applicable |
| (9) | Assuming the | |
Assuming the expiration | ||
Excludes shares held by Leucadia as to which Mr. Steinberg disclaims beneficial ownership. |
| (12) | Assuming the expiration or termination of all applicable deferral periods, Mr. Sharp would beneficially own 21,794 shares (representing less than 1% of the currently outstanding class). The table above excludes 16,012 unvested RSUs which do not represent a right to acquire shares within 60 days from January 1, 2012. |
| (13) | Assuming the expiration or termination of all applicable deferral periods, Mr. Cumming would beneficially own 19,028 shares (representing less than 1% of the currently outstanding class). Excludes 13,549 shares |
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held under the DSCP which do not represent a right to acquire shares within 60 days from January 1, 2012; and excludes shares held by Leucadia as to which Mr. Cumming disclaims beneficial ownership. |
Assuming the expiration or termination of all applicable deferral periods, Mr. O’Kane would beneficially own |
Includes |
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Under our By-Laws, the Board of Directors may determine its own size so long as it remains not less than five nor more than 17seventeen directors. Our Board currently consists of eight membersdirectors, and has proposed the election of eight directors at this year’s Annual Meeting. The directors elected at this Annual Meeting will serve a term that lasts until the directors elected at next year’s Annual Meeting of Shareholders assume their duties.
Each of the biographies of the nominees for election as directors below contains information regarding the person’s service as a director, business experience, director positions held currently or at any time during the past five years, and the experience, qualifications, attributes and skills that caused the Nominating and Corporate Governance Committee and the Board of Directors to determine that the person should be nominated as a director of the Company for re-election at the Company’s 2012 Annual Meeting of Shareholders.
Nominees
The following information relates to the nominees for election as directors:
RICHARD B. Handler,HANDLER, age47, 50, a nominee, has been our Chairman since February 2002, and our Chief Executive Officer since January 2001. Mr. Handler has also served as Chief Executive Officer of Jefferies & Company, Inc., our principal operating subsidiary (“Jefferies”), since January 2001 and as President of Jefferies since May 2006, and as Co-President and Co-Chief Operating Officer of both companies during 2000.2006. Mr. Handler was first elected to our Board in May 1998. He was Managing Director of High Yield Capital Markets at Jefferies from May 1993 until February 2000, after co-founding that group as an Executive Vice President in April 1990. Mr. Handler has also been the President and Chief Executive Officer of the Jefferies Partners Opportunity family of funds and is Chief Executive Officer of their successor entities, Jefferies High Yield Trading, LLC and Jefferies High Yield Holdings, LLC. He is also Chairman and Chief Executive Officer of the Handler Family Foundation, a non-profit foundation working primarily with underprivileged children.youth. Mr. Handler received an MBA from Stanford University in 1987, where he serves onas a member of the BusinessAdvisory Council for the University’s Graduate School Advisory Board.of Business. He received his BA in Economics from the University of Rochester in 1983 where he also serves on the Board of Trustees, and is Chairman of the University’s Finance Committee.
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leadership in both favorable and difficult markets and commitment to the Company, including his significant stock ownership, as key attributes and skills that make him uniquely suited to continue to serve as a director, President of Jefferies, our Chief Executive Officer, and Chairman of our Board.
BRIAN P. Friedman,FRIEDMAN, age 53,55, a nominee, has been one of our directors and an executive officer since July 2005, and has been Chairman of the Executive Committee of Jefferies since 2002. Since 1997, Mr. Friedman has also been President of Jefferies Capital Partners (formerly known as FS Private Investments)., a private equity fund management company now owned by Mr. Friedman and Jefferies. Mr. Friedman splits his time between his role with us and his position with Jefferies Capital Partners. Mr. Friedman was previously employed by Furman Selz LLC and its successors, including serving as Head of Investment Banking and a member of its Management and Operating Committees. Prior to his 17 years with Furman Selz and its successors, Mr. Friedman was an attorney with the New York City law firm of Wachtell, Lipton, Rosen & Katz. As a result of his management of various private equity funds and the significant equity positions those funds hold in their portfolio companies, Mr. Friedman serves on several boards of directors of private portfolio companies, and has served on the Board of the general partner of one public portfolio company, K-Sea Transportation L.P. from 2004 through 2011, and has served on the Board of Carrols Restaurant Group, Inc., a public company that owns and operates several restaurant chains, since 2004.
W. Patrick Campbell,PATRICK CAMPBELL, age63, 65, a nominee, has been one of our directors since January 2000. Mr. Campbell was Chairman and Chief Executive Officer of Magex Limited from August 2000 throughto April 2002 and is currently an independent consultant in the media and telecom field. From 1994 until October 1999, Mr. Campbell was Executive Vice President of Corporate Strategy and Business Development at Ameritech Corp. where he was a member of the Management Committee and directed all corporate strategy and merger and acquisition activity. From 1989 to 1994, Mr. Campbell served as President and Chief Executive Officer of Columbia TriStar Home Video, a Sony Pictures Entertainment Company, and has previously been President of RCA/Columbia Pictures International Video. Mr. Campbell has also been a director of Black & Veatch since November 1999. Mr. Campbell is Chairman of our Audit Committee, and a member of our Compensation Committee and Corporate Governance and Nominating Committee.
IAN M. CummingCUMMING, age 68,71, a nominee, has been one of our directors since April 2008 and a director of Jefferies High Yield Holdings, LLC since April 2007. Mr. Cumming has served as a director and Chairman of the Board of Leucadia since June 1978. Leucadia is a diversified holding company engaged in a variety of businesses, including beef processing, manufacturing, telecommunications, property managementland based contract oil and services,gas drilling, gaming entertainment, real estate activities, medical product development and winery operations. Mr. Cumming is also Chairman of the Board of The FINOVA Group Inc., formerly a middle market lender. Mr. Cumming is a director of Skywest, Inc., a Utah-based regional air carrier, HomeFed Corporation (“HomeFed”), a publicly
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a member of our Compensation Committee and Corporate Governance and Nominating Committee.
RICHARD G. Dooley,DOOLEY, age79, 82, a nominee, has been one of our directors since November 1993. From 1978 until his retirement in June 1993, Mr. Dooley was Executive Vice President and Chief Investment Officer of Massachusetts Mutual Life Insurance Company (“Mass Mutual”MassMutual”). Mr. Dooley was a consultant to Mass MutualMassMutual from 1993 to 2003. Mr. Dooley has been a director of Kimco Realty Corporation since 1990 and is a member of its Compensation Committee. Mr. Dooley is Chairman of our Compensation Committee and a member of our Audit Committee and Corporate Governance and Nominating Committee.
ROBERT E. Joyal,JOYAL, age 64,66, a nominee, has been one of our directors since January 2006. Previously, Mr. Joyal was the President of Babson Capital Management LLC, an investment management firm, a position that he held from 2001 until his retirement in June 2003. Mr. Joyal served as Managing Director of Babson from 2000 to 2001. He also served as Executive Director(1997-1999) from 1997 to 1999 and Vice President and Managing Director(1987-1997) of the Massachusetts Mutual Life Insurance Company.Company and a director of York Enhanced Strategy Fund (2005-06), and a director of Scottish Reinsurance Group, Ltd. (2007—2011). Mr. Joyal is a trustee of various Investment Companiesinvestment companies sponsored by the Massachusetts Mutual Financial Group and various private equity and mezzanine funds sponsored by First Israel Mezzanine Investors. Mr. Joyal iswas also a director of Alabama Aircraft Industries, Inc. since, from 2003 through 2010, and has been a director of Kimco Insurance Company since 2007, and of Scottish Reinsurance Group, Ltd.2007. Mr. Joyal is Chairman of our Corporate Governance and Nominating Committee, and a member of our Audit Committee and Compensation Committee.
MICHAEL T. O’KaneO’KANE, age 63,66, a nominee, has been one of our directors since May 2006. From 1986 throughto 2004, Mr. O’Kane served in various capacities for TIAA-CREF, first as a Managing Director — Director—Private Placements from 1986 throughto 1990, then as Managing Director — Director—Structured Finance from 1990 throughto 1996 and finally as Senior Managing Director — Director—Securities Division from 1986 throughto 2004, when he was responsible for approximately $120 billion of fixed income and $3.5 billion of private equity assets under management. Since August 2005, Mr. O’Kane has also served on the Board of Directors and on the Audit, Finance and Risk Oversight Committee of Assured Guaranty, Ltd. In addition, Mr. O’Kane served on the Board of Trustees of Scholarship America, a non profit company engaged in providing scholarships for young students to attend college, from 2001 to 2006. Mr. O’Kane is a member of our Corporate Governance and Nominating Committee, Audit Committee and Compensation Committee.
JOSEPH S. SteinbergSTEINBERG, age 65,67, a nominee, has been one of our directors since April 2008 and a director of Jefferies High Yield Holdings, LLC since April 2007. Mr. Steinberg has served as a director of Leucadia since December 1978 and as its President since January 1979. In addition, Mr. Steinberg is Chairman of the Board of
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HomeFed and of Mueller, and was a director of FINOVA, White Mountains Insurance Group, Ltd., and Fortescue.Jordan Industries, Inc. Mr. Steinberg is a member of our Compensation Committee and Corporate Governance and Nominating Committee
Other Executive Officers
Our Executive Officers are appointed by the Board of Directors and serve at the discretion of the Board. Other than Messrs. Handler and Friedman, for whom information is provided above, the following sets forth information as to the Executive Officers:
PEREGRINE C. BroadbentBROADBENT, age 45,48, has been our and Jefferies’ Executive Vice President and Chief Financial Officer since November 2007. Prior to joining us, Mr. Broadbent was employed by Morgan Stanley for 16 years, including serving as Managing Director, Head of Institutional Controllers (Fixed Income, Equity and Investment Banking) of Morgan Stanley sincefrom November 2003 through November 2007, and was Morgan Stanley’s Managing Director, Head of Fixed Income Infrastructure (Operations and Controllers) from March 2002 throughto November 2003. Mr. Broadbent is a Chartered Accountant in the United Kingdom.
CHARLES J. HendricksonHENDRICKSON, age 59, has been61, was our Treasurer and from July 2006 through January 2012 and has been the Treasurer and a Managing Director of Jefferies since July 2006. Mr. Hendrickson was Managing Director and Treasurer atof Donaldson, Lufkin & Jenrette, Inc. from March 1984 to September 2000, when it was acquired by Credit Suisse, and provided continuing services to Credit Suisse through the transition until February 2001. Mr. Hendrickson has served as a director of ImaginAsian Entertainment, Inc. since 2004 and served as its interim Chief Financial Officer from 2005 to 2006 when he joined Jefferies. From 2001 throughto 2005 Mr. Hendrickson also served on the Board of
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MICHAEL J. SHARP, age66, 56, has been our and Jefferies’, Executive Vice President, General Counsel and Secretary since December 2002.November 2010. Prior to joining us in September 2010, Mr. FellerSharp had been a partner with the law firm of Wilmer Cutler Pickering Hale & Dorr LLP since March 2009. Previously, Mr. Sharp was a Senior Vice President, Secretary and General Counsel of SoundView Technology Group, Inc.Citigroup’s Global Wealth Management, Global Consumer Bank, and Global Credit Card business units. Before his 12 years at Citigroup, Mr. Sharp was a litigation associate at Cravath, Swaine & Moore, which he joined in 1992. Mr. Sharp began his legal career as a judicial clerk on the United States Court of Appeals for the Eleventh Circuit. Before embarking on a legal career, Mr. Sharp traded U.S. Treasury Bonds from 1981 to 1988.
JOHN F. STACCONI, age 49, became our Global Treasurer in January 2012. Previously, Mr. Stacconi was Managing Director and International Treasurer at Nomura International from January 2010 through December 2011. Mr. Stacconi was Managing Director in Corporate Treasury at JP Morgan from June 2008 through December 2009. Previously, Mr. Stacconi had been at Bear Stearns since 1985, serving as Senior Managing Director from 1999 to December 2002. Prior to joining SoundView’s predecessor, Wit Capital Group Inc., in 1999, Mr. Feller was a partner at Morgan Lewis & Bockius LLP, where he was the leaderthrough 2008 and Treasurer of that firm’s securities regulation practice group. Before joining Morgan Lewis in 1979, Mr. Feller worked at the SEC as the Associate Director of the Division of Market Regulation, a position in which he was in charge of the Office of Market Structure and Trading Practices.
The following table provides information regarding our compensation plans (other than our tax qualified ESOP and 401(k) Plan), under which our equity securities were authorized for issuance as of December 31, 2008.
| Number of Securities | ||||||||||||
| Number of Securities | Weighted-Average | Remaining Available for | ||||||||||
| to be Issued Upon | Exercise Price of | Future Issuance Under | ||||||||||
| Exercise of Outstanding | Outstanding | Equity Compensation Plans | ||||||||||
| Options, Warrants and | Options, Warrants | (Excluding Securities | ||||||||||
| Rights | and Rights | Reflected in Column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
| Equity compensation plans approved by security holders | 39,796,099 | (1) | $ | .05 | (2) | 36,855,951(3 | ) | |||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 39,796,099 | $ | .05 | 36,855,951 | ||||||||
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | 7,425,755 | (1) | $ | .01 | (2) | 47,402,387 | (3) | |||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
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| |||||||
Total | 7,425,755 | $ | .01 | 47,402,387 | ||||||||
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| (1) | Includes | |
| (2) | The weighted average exercise price of outstanding options, warrants and rights is calculated including RSUs and similar rights which have an exercise price of zero. If the weighted average exercise price was calculated including only those awards that have a specified exercise price, which in our case is only options, the weighted average exercise price for plans approved by security holders would be | |
| (3) | Of the shares remaining available for future issuance under the |
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The Board of Directors is responsible for supervision of our business. During 2008,fiscal 2011, the Board held 119 meetings. To assist it in carrying out its duties, the Board has three committees: an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. Each incumbent member of the Board of Directors attended at least 80%90% of the 2008fiscal 2011 meetings of the Board of Directors and its committees that he was required to attend.attend, except Mr. Steinberg who attended 62.5%. Though we do not have a policy regarding attendance by directors at the Annual Meeting of Shareholders, twoone of the eight directors attended the Annual Meeting of Shareholders in 2008.
Director Independence
The Board has adopted Corporate Governance Guidelines that contain categorical standards for the determination of director independence, which are available to the public through the Jefferies website atwww.jefferies.com. The Board has determined that directors who comply with the standards in the Corporate Governance Guidelines have no material relationship with us as required by New York Stock Exchange Rules. The Board has noted relationships by and among its Board membersdirectors and nominees that may give rise to conflicts, inconflicts. In particular, the boardBoard has noted that
Mr. Campbell also serves on the Compensation Committee of Black & Veatch
Mr. Dooley also serves on the Compensation Committee of Kimco Realty Corp.
Mr. Dooley was an associate of Mr. Joyal prior to Mr. Dooley’s retirement from Mass Mutual
Mr. Cumming and Mr. Steinberg, each serves in various capacities at Leucadia and its affiliates and investments
Mr. Steinberg also serves on the Compensation Committee of HomeFed Corp.
Mr. Cumming and Mr. Steinberg have had prior social and business relationships with various members of our management, including Mr. Handler
The Board has determined that these facts do not impair the independence of these directors or lessen their qualifications to serve on the Board, or on any committees. The Board has determined that Messrs. Campbell, Dooley, Cumming, Joyal, O’Kane
Audit Committee and Steinberg each meet the independence standards as set forth in the Corporate Governance Guidelines.
The current Audit Committee members are W. Patrick Campbell, Chairman, Richard G. Dooley, Robert E. Joyal and Michael T. O’Kane. The Board has determined that each member of the Audit Committee is a “Financial Expert” as defined by applicable New York Stock Exchange and SEC rules. The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of our financial statements, (2) our independent auditor’s qualifications and independence, (3) the performance of our internal audit function and independent auditors, and (4) our compliance with legal and regulatory requirements. following:
| (1) | the integrity of our financial statements |
| (2) | our independent registered public accounting firm’s qualifications and independence |
| (3) | the performance of our internal audit function and independent registered public accounting firm |
| (4) | our compliance with legal and regulatory requirements |
| (5) | the selection and compensation of our independent registered public accounting firm |
The Audit Committee has adopted a written charter which is available on our website as described below. During 2008,2011, there were 8nine meetings of the Audit Committee.
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Compensation Committee
The current Compensation Committee members are Richard G. Dooley, Chairman, W. Patrick Campbell, Ian M. Cumming, Robert E. Joyal, Michael T. O’Kane and Joseph S. Steinberg. The Compensation Committee is appointed by the Board to (1) advise senior management on the administration of our compensation programs, (2) review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation, (3) make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval; and (4) produce a compensation committee report on executive compensation required by the rules and regulations of the SEC. to:
| (1) | advise senior management on the administration of our compensation programs |
| (2) | review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation |
| (3) | make recommendations to the Board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to Board approval |
| (4) | produce a compensation committee report on executive compensation required by the rules and regulations of the SEC |
The Compensation Committee has the sole authority to select, retain and terminate a compensation consultant and to approve the consultant’s fees and other retention terms. The Committee did not retain a compensation consultant in 2008. The Compensation Committee has adopted a written charter which is available on our website as described below. During 2008,2011, there were 86 meetings of the Compensation Committee. We anticipate the Compensation Committee will consist of Richard G. Dooley, Chairman, W. Patrick Campbell, Ian M. Cumming, Robert E. Joyal, Michael T. O’Kane and Joseph S. Steinberg after the annual meeting.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee during 2011 were our current or former employees or officers. The Compensation Committee members other than Messrs. Cumming and Steinberg were not involved in transactions with us which would require disclosure as related party transactions. Messrs. Cumming and Steinberg were not involved in transactions which would require disclosure other than the transactions which are described in detail under the heading “Transactions With Related Persons – Leucadia National Corporation.”
Use of Compensation Consultant
The Committee retained the services of Mercer as its compensation consultant in January of 2010, but neither management nor the Compensation Committee has used the services of a compensation consultant since that time. In 2010, Mercer was engaged directly by the Compensation Committee to provide advice and counsel to the Committee generally, and specifically, to:
provide the Committee with an executive compensation assessment for the CEO and Chairman of the Executive Committee
outline potential bonus approaches for 2010
develop recommended short and long-term incentive program approaches and levels for 2011
support our disclosure efforts
At that time, Mercer assisted the Committee in proposing its peer group, provided benchmarking for the compensation arrangements of the CEO and Chairman of the Executive Committee against the peer group, recommended the implementation of a three year performance based equity award, and developed preliminary 2010-12 compensation recommendations for review by the Committee.
Compensation Committee Subcommittee
In order to ensure that the directors making compensation decisions qualify as “outside directors” under Section 162(m) of the Internal Revenue Code and non-employee directors for purposes of Rule 16b-3 under the
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Securities Exchange Act of 1934, the Compensation Committee formed a subcommittee for consideration of executive officer compensation comprised of Messrs. Dooley, Campbell, Joyal and O’Kane. On November 29, 2011, the subcommittee met to review the fiscal 2011 compensation of Mr. Hendrickson and Mr. Broadbent. The subcommittee approved their long-term equity compensation grants and total fiscal 2011 awards. On December 19, 2011, the subcommittee met to review the fiscal 2011 compensation of Mr. Handler and Mr. Friedman. Mr. Handler and Mr. Friedman voluntarily offered to forgo any year-end cash compensation which they would have been entitled to receive under the 2011 Pay for Performance calculations, and the subcommittee accepted the proposal by Messrs. Handler and Friedman to receive zero bonus each. The subcommittee also approved payment of Mr. Sharp’s year-end compensation in accordance with the pay for performance matrix and determined that the award would be all in cash.
Corporate Governance and Nominating Committee
The current Corporate Governance and Nominating Committee members are Robert E. Joyal, Chairman, W. Patrick Campbell, Ian M. Cumming, Richard G. Dooley, Michael T. O’Kane and Joseph S. Steinberg. The Corporate Governance and Nominating Committee (1) identifies individuals to the Board who are qualified to become board members consistent with criteria approved by the board, (2) recommends individuals to the Board for nomination as members of the Board and its committees, (3) develops and recommends to the Board a set of
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| (1) | identifies individuals to the Board who are qualified to become Board members consistent with criteria approved by the Board |
| (2) | recommends individuals to the Board for nomination as members of the Board and its committees |
| (3) | develops and recommends to the Board a set of corporate governance principles applicable to the corporation |
| (4) | oversees the evaluation of the Board and management |
In nominating candidates, the Committee takes into consideration such factors as it deems appropriate, which may include judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members, and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board. The Committee seeks members with diverse backgrounds, with an understanding of the Company’s business, and with a reputation for integrity, and has adopted a policy with regard to the consideration of diversity in evaluating candidates. The Committee is committed to a policy of inclusiveness and takes reasonable steps to see that women and minority candidates are considered for the pool from which the Board nominees are chosen. In addition to candidates proposed by management, the Committee may consider candidates proposed by shareholders, but is not required to do so. If the Committee considers any candidates proposed by shareholders it would consider the same factors in making its recommendation as it uses when evaluating candidates proposed by management or the Board. To suggest a nominee, address your correspondence to Lloyd H. Feller,Michael J. Sharp, our corporate Secretary, at our address listed at the top of the front page of this Proxy Statement. The Corporate Governance and Nominating Committee has adopted a written charter which is available on our website as described below. During 2008,2011, there were 4 meetingswas one meeting of the Corporate Governance and Nominating Committee.
Board Organization, Leadership and Accessibility
The non-managementnon-employee directors of the Board of Directors meet in executive session at each meeting of the Board of Directors. These executive sessions are led by the non-management directorsnon-employee members of the Board on a rotating basis. The non-managementnon-employee directors have the authority to retain outside consultants and to schedule additional meetings.
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independent director may cut off or reduce access of other directors to the CEO and management and result in a less informed and less effective Board; and (3) the Board has a procedure for determining who shall lead non-employee executive sessions of the Board.
Important documents related to our corporate governance are posted on our website athttp://www.jefferies.com/and may be viewed by following the “About Us”“Investor Relations” link near the toplower middle of the left menu,screen, and then the “Corporate Governance” link in the menu that follows. Documents posted include our Code of Ethics, Corporate Governance Guidelines and the Charters for each of the boardBoard committees mentioned above, which may be accessed directly athttp://www.jefferies.com/charters/. We will also provide you with any of these documents in print upon request without charge. You may direct your request to Investor Relations, Jefferies & Company, Inc., 520 Madison Avenue, New York, NY 10022, or by calling203-708-5975 or sending an email toinfo@jefferies.com.
We have established a process by which shareholders and other interested parties can contact our Board of Directors, the non-management directors as a group, or a committee of the Board of Directors. To contact our Board, you can send an email to Lloyd H. Feller,Michael J. Sharp, our Corporate Secretary, atlfeller@jefferies.commsharp@jefferies.com, or write to: Lloyd H. Feller,Michael J. Sharp, Executive Vice President and General Counsel, Jefferies Group, Inc., 520 Madison Avenue, New York, NY, 10022. To contact our non-management directors as a group, a committee of the Board of Directors directly, or the chairman of the next executive session of the non-management directors, write to the party you wish to contact,c/o the General Counsel’s Office, Attention: Corporate Secretary, Jefferies Group, Inc. 520 Madison Avenue, New York, NY, 10022.
This section provides a narrative discussion of our objectives when compensating the named executive officers, and the policies we have implemented to achieve those objectives. It also outlines what the compensation program is designed to reward, each element of compensation, why we chose to pay each element, how we determined the amount we would pay, and how each compensation element fits into our overall compensation objectives. Although we include examples in this discussion to illustrate how our policies have been implemented, you should also refer to the tables following this discussion for specific disclosures about the compensation of each named executive officer. The specific disclosures in the tables and the narrative following the tables together with this general discussion of objectives and policies should provide you with a complete picture of how we approach and implement compensation for our named executive officers.
Objectives of our Compensation Programs
Our compensation policies, plans and programs for executive officers are intended to meet three key objectives:
Provide competitive levels of compensation in order to attract and retain talented executives and firm leaders. | ||
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Certain components of our compensation programs are targeted to help us achieve one of those objectives, and other components help us achieve multiple objectives simultaneously.
Attract and Retain Talented Employees
The Company is engaged in a highly competitive service business, and its success depends on the leadership of its senior executives and the talent of its key employees. As the financial markets continue to undergo significant
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turmoil, we continue to broaden and deepen the team that serves our clients. We needhave continued to take advantage of opportunities as they arise to hire additional talented individuals to join our team, with the continual focus of delivering an exceptional product for our clients. As a result, the focus of our compensation arrangements continues to be allowing us to attract and retain highly capable individuals. Our goal has been to ensure that our compensation program provides competitive levels of compensation that are realistic in light of currentrecent and expected market conditions, but responsiveand inspire continued loyalty to competitive forces and alternative opportunities. In prior years, we usedthe Company.
When formulating the compensation policies for 2011, the Committee evaluated whether to use a “peer group” of public companies based on comparable business activities and competition for clients and executive talent. We didto guide their decision making process. Especially when considering the prevalence of either large bank holding companies or smaller niche firms in the financial sector, the Committee does not make reference to this peer group in 2008 and givenview the numberfirm as having any true peers. As a global non-bank securities firm with a diverse line of businesses, we are sufficiently different from companies previously containedthat might otherwise be considered in our peer group which have ceased doing businessthat are either much larger bank holding companies or changed their business models, we will identify an entirely new peer group if we determine to use athose that are smaller or not wholly compatible with our business. Although the Board reconstituted its peer group in 2009 and used that peer group as a general frame of reference for determining long-term equity compensation intended to relate to 2010 through 2012 compensation, the future.
Encourage Long-Term Service and Loyalty
We encourage long-term service and loyalty to the Company by fostering an employee ownership culture. We are proud of the large percentage of the Company’s common stock that is owned by our employees and executives. This ownership encourages our employees and executives to act in the best long-term interest of the Company.Company, and is enhanced through the use of long-term restrictions on vesting. We have not adopted ownership stock ownership guidelines for executives due to their historically large relative stock ownership and our strong culture of stock ownership. However, we promote ownership through long-termWe have also used equity grants with multi-year vesting restrictions onor restricted cash with a one year or greater vesting whichrequirement to encourage employees to take a multi-yearmulti- year perspective, rather than a short termshort-term perspective, on the Company’s health and opportunities. Consistent with this approach, our historical practice has been to target the mix of types of compensation for our CEO at between 35% and 50% in some form of equity or equity linked compensation.
Relative Fairness
As the brokerage and financial services industry has undergoneemerges from a period of tremendous challenges, it has been difficult to balance the need tobecomes even more essential we retain talented producers and executives with a stagnant marketplace. Ourincentivize them to capitalize on market opportunities. While the financial services market is reshaped, our compensation objective continues to focus on rewarding personal productivity and fostering a results-oriented environment, while maintaining a non-variable component of compensation to provide stability. Our two most senior executives continue to have roles that blend both management and production responsibilities and accordingly, the Compensation Committee generally considers the compensation opportunities those individuals would have if they chose to focus entirely on their production abilities. As a result, due to the difficult market in 2008, no bonuses were awarded to our two most senior executives. We believe that maintaining our entrepreneurial culture is still essential and makes us unique among our competitors, so we continue to offer compensation opportunities that are driven by performance and results. We expect relative fairness to become a more significant factor in future years when the market and economy stabilize.
Our Compensation Committee reviewslooks to the recommendations of our CEO and Chairman of the Executive Committee in setting the compensation for the other named executive officers.
What Our Compensation Program is Designed to Reward
By linking compensation opportunities to performance of the Company as a whole, we believe our compensation program encourages and rewards:
Executive efforts at enhancing firm-wide productivity and profitability, and
Entrepreneurial behavior, in which executives are shareholders and act to maximize long-term equity value in the interest of all shareholders.
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Consistent with rewarding these specific activities, we have fashioned our policies to reward productivity and profitability of our executive officers in a performance based environment much the same way we approach other employees responsible for the generation of revenue throughout the firm, and we expect our executives to set the
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In this section we discuss each element of our compensation program, why we choose to pay each element, and how we determine the amount of each element to pay. Our annual compensation program generally consists of the following elements which make up our executives’ total direct compensation:
Salary
Performance Based Bonus
Long-Term Equity Incentive
Other Benefits
We also provide medical, dental and other similar benefits to executives and other employees that are not part of what we consider direct compensation, and are not included in the tabular disclosures. We believe providing these benefits furthers our compensation objectives. We intend these benefits to be generally competitive, but our evaluation of these benefits is separate from our decisions on total direct compensation. Our executives participate in these benefit programs on the same basis as all our other employees.
Our Compensation Committee acts on behalf of the Board of Directors and represents the shareholders to advise senior management in the administration of the compensation program for the named executive officers generally, and plays a greater role in the administration of the program as it relates to our CEO and Chairman of the Executive Committee. Our Committee operates under a charter adopted by the Board of Directors, which delegates authority to the Committee and provides for its governance.
Employment Contracts and the Role of Negotiation
None of our named executives had an employment contractcontracts in 2008 and Mr. Broadbent’s agreement expired on December 31, 2008.2011, other than Michael Sharp, who joined us in late 2010. We believe that it is in the Company’s best interest to minimize the number of employment agreements entered into with our key executives. Our Compensation Committee generally enters into, and we disclose, compensation arrangements with our key executives on an annual basis, but we do not enter into employment contracts with preexisting employees which would give our executives a right to future employment or to large golden parachute payments if they are terminated. Instead, we depend upon their overall compensation opportunity, share holdings, the vesting of long termlong-term equity grants and their personal commitments to encourage retention and long-term serviceour firm to motivate the loyalty of our key executives.
Avoiding employment contracts allows our compensation committeeCompensation Committee to retain greater flexibility in setting periodic compensation terms. Our Compensation Committee makes decisions on the amount of executive compensation to pay by focusing on total direct compensation for a given year, which includes the sum of all annual base salary, bonuses and attributable long-term compensation.
The Committee considered the views of the CEO and Chairman of the Executive Committee in setting the elements and amounts of their own compensation, and received significant input from the CEO and Chairman of the Executive Committee in determining the bonus formulas for the CFO and General Counsel. The Chief Executive Officer is the principal negotiator with the Compensation Committee regarding his own compensation and the compensation of the Chairman of the Executive Committee, subject to approval by the Compensation Committee. The Chairman of the Executive Committee was the principal negotiator regarding the compensation
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of the Chief Financial Officer, subject to the review and approval of the Compensation Committee. The negotiation regarding the amounts of total compensation and the amount of long termlong-term equity awards for the CEO and Chairman of the Executive Committee occurs primarily between the CEO and the Chairman of the Compensation Committee, but the final decision, and the analysis relied upon to reach that decision, are the Committee’s.
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We pay our named executive officers a base salary in order to provide them a predictable level of income and enable the executive to meet living expenses and financial commitments. We view base salary as a way to provide a non-performance based element of compensation that is certain and predictable. Though we make our decisions on executive compensation focusing on total direct compensation for a given year including base salary, annual bonus and long-term awards, we are sensitive to the needs of our executives for a certain level of compensation stability. The base salaries we have established for the named executive officers reflects our understanding of the trade-off that exists between aligning the interests of the named executive officers as closely as possible with those of the Company’s shareholders and our desire to avoid exposing them to compensation risk. We believe the base salary levels we have established strike the proper balance and that providing a predictable base salary is essential to attract and retain talented executives and provide a compensation package that is perceived as fair, in comparison to other companies and within the Company.
With respect to the base salary paid to executives,our named executive officers in fiscal 2011, our Compensation Committee’s determination of the appropriate level of base salary iswas subjective and not formulaic. For
The base salary for the CEO and Chairman of the Executive Committee, base salaries areis largely a result of previous negotiation and historical precedent. The salaries forAt the time he began serving as our CEO, and Chairman of the Executive Committee were part of the originally negotiated arrangements agreed upon by each executive when they assumed their current roles and the Committee has not seen a performance based reason to change this arrangement. At that time, the Committee agreed to pay the CEOMr. Handler the maximum base salary permitted within the deductibility limits of Internal Revenue Code § 162(m) and subsequently, the§162(m).
The Committee agreed to payhas historically paid the Chairman of the Executive Committee a base salary equalthat is a fixed ratio to 50%the CEO’s salary. In December 2009, the Compensation Committee established the ratio at 75% of the CEO’s base salary. The Compensation Committeesalary beginning January 1, 2010, based on its recognition of the important contributions to the firm’s growth Mr. Friedman has continued following this historical precedent in recent yearsmade and prefersthe growing amount of managerial time required to address performance related compensation through the bonus process rather than through adjustments to base salary.manage an increasingly complex firm. Though the continuation of this relationship is not guaranteed, the Committee has viewed it as an effective way to align the interests of the CEO and Chairman of the Executive Committee and to simplify a highly subjective process that is not the product of any additional quantitative or qualitative analysis. The Committee continues to use base salary to provide a non-performance based cash component to their compensation, and provides performance based and retention oriented compensation through bonuses and long term equity grants.
The base salaries for our other named executive officers are arrived at through a process of negotiation between the named executive officer anddetermined by the Chief Executive Officerand/or the Chairman of the Executive Committee and are viewed in light of historical precedent within the firm, competitive factors, the limits of § 162(m)§162(m), and the desire to provide a non-performance based cash component of compensation.
The Committee continues to use base salary to provide compensation not directly tied to performance, and bonuses and long-term equity grants to provide performance based and retention oriented compensation.
Bonuses
We use annual bonuses as our primary tool for encouraging executives to maximize short-term productivity and profitability. Annual incentive awards providemotivate executives with an incentive to focus on aspects of Company performance that we believe are key to its success. Accordingly, we determinehave determined bonuses for our CEO, Chairman of the Executive Committee and General Counsel in whole or in part by reference to for certain executives, earnings per share, return on equity, and pre-tax profit margin. These financial measures are calculated using our consolidated financial results, adjusted to add back
To take these factors into account, the negative effect of extraordinary transactions (e.g. mergers, acquisitions, or divestitures), if any.
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The Committee followed this approach in 2011 and established 2011 formulas and targets at its meeting on February 9, 2011. These formulas, which were part of Mr. Handler, Mr. Friedman and Mr. Sharp’s compensation packages in 2011, provided for no annual bonus if threshold levels of performance were not achieved, a targeted amount of annual bonus for achievement of target performance, and greater- or less-than target payouts for performance that exceeded or fell short of the specified target levels, up to a specified maximum payout. The 2011 formulas were dependent on our earnings per share, return on equity and pre-tax profit margin. These financial measures were calculated using consolidated after-tax earnings from our continuing operations. All financial results were adjusted to add back the negative effect of extraordinary transactions (e.g. mergers, acquisitions, divestitures), if any, occurring during 2011. No adjustments were made in 2011.
The Committee established six tiered performance measures for each of the three performance criteria as follows:
Level | Performance vs. Prior Year | |
Threshold | 25% below Target | |
Below Target | 10% below Target | |
Target | Target | |
Above Target | 10% above Target | |
Superior | 20% above Target | |
Superior+ | 30% above Target |
The Committee then assigned a weight to each of the performance criteria (earnings per share, return on equity and pre-tax profit margin), and used that weighting, together with the threshold category achieved to determine what portion of the executive’s target bonus the individual would be entitled to receive, as follows:
Earnings per Share | 55 | % | ||
Return on Equity | 40 | % | ||
Pre-tax Profit Margin | 5 | % | ||
| 100 | % |
The Committee interpolates the amount of bonus between the set thresholds of performance when our performance falls between the set thresholds, and reserves the right to exercise negative discretion to reduce amounts or to take into consideration additional performance measures in determining whether to reduce calculated bonus awards, but does not have discretion to increase the bonus awards.
For 2011, the Committee established targets for Earnings per Share, Return on Equity and Pre-tax Profit Margin at $1.28, 8.6% and 16.5% respectively. Our performance fell above the “Target” amount but below the “Above Target” amount in the Earnings per Share category, and above the “Threshold” amount but below the “Below Target” amount in the Return on Equity and Pre-tax Profit Margin categories, resulting in an annual Performance Based Bonus calculated amount of $4,879,565 for Mr. Handler, and $3,659,674 for Mr. Friedman. The Committee did not seek to exercise its negative discretion for fiscal 2011, but upon Mr. Handler and Mr. Friedman’s request, the Committee agreed to reduce their performance bonuses to zero.
We believe the targets we set were substantially uncertain at the time they were established and were set at levels that would make target performance attainable only with continued high level performance, and above
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target payouts attainable only through significant effort and exemplary performance. These performance goals were intended to motivate and reward our executives for achieving pre-determined goals with respect to earnings per share, return on equity and pre-tax profit margin, and to provide equity-based compensation that would closely align their interests with those of shareholders.
We have also adopted programs permitting deferrals of compensation, so that potentially non-deductible compensation will be paid following termination of an executive’s service, at a time when payment of such compensation will not be subject to limits on deductibility under Section 162(m). None of our named executive officers deferred income during fiscal 2011. We retain the flexibility to enter into arrangements that may result in non-deductible compensation to executive officers, which may include non-qualifying awards under the 2003Incentive Plan.
We continue to recognize that Mr. Handler’s compensation also reflects his significant direct contributions to the operating results of the Company, particularly with respect to the High Yield Division, equity trading, investment banking, and management of Jefferies High Yield Trading, LLC (discussed in “Transactions with Related Person” below), in addition to his duties as CEO. Mr. Handler does not receive compensation for these services apart from his compensation from us generally as described in the Summary Compensation Table and other tables below. Since he assumed the duties of CEO, we have tied his bonus compensation solely to performance of the Company as a whole, and sought to focus his efforts on creating long-term shareholder value through an emphasis on restricted stock awards.
Similarly, we established Mr. Friedman’s compensation opportunities in a manner we believed would motivate him toward maximizing firm wide results and long-term value creation. We based Mr. Friedman’s compensation opportunity on the performance of the Company as a whole, but we considered his responsibilities overseeing our operations and his compensation opportunities as a fund manager, when establishing the level of compensation we would pay him. See the “Transactions with Related Persons” section below.
For Broadbent and Mr. Hendrickson, we maintained their salaries at prior year levels, which continue to remain in line with each of their originally negotiated terms of employment.
For Mr. Sharp, the terms of his compensation were governed by his employment agreement during fiscal 2011. His employment agreement called for determination of his bonus using the same performance matrix used for Mr. Handler and Mr. Friedman, which resulted in a bonus of $887,956 for Mr. Sharp. The Committee determined that it would pay Mr. Sharp the amount determined by the performance matrix set forth above in accordance with his employment agreement.
For all of the named executive officers, our commitment to long-term equity compensation encourages ownership of a significant equity stake in the Company, which we believe is important to promoting a culture of entrepreneurship. Consistent with this, we have implemented a program permitting employees and executive officers to defer settlement of equity awards, including restricted stock units. Deferrals of restricted stock units enable the employee to specify that shares will be delivered in settlement at a date later than the date the risk of forfeiture will lapse. The cost of such a program to the Company results mainly from deferring the time at which tax deductions for the equity compensation may be claimed.
Long-Term Awards
Long-term equity-based awards serve both to align the interests of executive officers with those of shareholders and to promote retention and long-term service to the Company. These awards provide increasing rewards to executives if the value of the Company’s stock rises during the life of the award, thus encouraging a long-term focus and aligning the interests of executive officers with the interests of shareholders. Since he assumed
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In fiscal 2011, only Mr. Hendrickson received a long-term equity grant. His grant continued the duties of CEO,pattern the Compensation Committee has tied Mr. Handler’s performance based compensation to performancefollowed recently of the Company as a whole, and has provided an incentive for him to focus on creating long-term shareholder value through an emphasis on stock awards.
In recognition of the more challenging times faced throughout our industry and the economy generally, the Committee determined that for fiscal 2011 it would offer its named executive officers the same alternative to traditional long-term equity-based awards that it offered to employees many of whom have received a large component of their recent compensation ingenerally. Employees were offered the form ofchoice between long-term restricted equity grants.
In 2002, our Compensation Committee of trends inbegan using multi-year grants to establish the compensation of executivesour CEO, and continued this pattern with grants in the securities industry and its subjective judgmentearly 2010 which were intended to serve as to the appropriate level of totallong-term compensation for the executive officer. The Committee’s determination of the number of equity grants2010, 2011 and their vesting terms is highly subjective and generally follows a negotiation with our CEO. The Committee intends these grants to be more focused on long-term employee retention rather than current year performance metrics. With respect to our Chief Executive Officer and Chairman of the Executive Committee, a significant factor in our Compensation Committee’s determination of the amount of equity-based awards granted is the fact that such producer-executives have forgone other internal and external opportunities for increasing their personal earnings that would have arisen if they had focused solely on their production capabilities, but have instead agreed to serve in management roles in addition to producing responsibilities. We believe that the long-term equity-based component of such executives’ overall compensation allows us to retain such talented individuals, while also aligning their interests with those of our other shareholders. Equity awards provide compensation linked to the performance of our stock, with a strong inducement to long-term service.
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Other Benefits
The Company provides its named executive officers with medical, dental, life insurance, disability and other similar benefits to executives and other employees that are not part of what we consider direct compensation. We intend these benefits to be generally competitive, in order to help in our efforts to recruit and retain talented executives. We have not implemented severance arrangements with our named executive officers; however, the Companyour practice has adopted a firm wide severance policy which limitsgenerally been to limit severance payments to no more than six months salary.salary for newer employees, and up to one year of salary for those who are retirement eligible (the individual has served at least twelve years with us and their age plus years in service is greater than 60). We do not provide significant enhancements to compensation in connection with a change in control. We believe that the substantial equity stake of our executives provides alignment with the interests of shareholders, so that the executives can be expected to consider potential strategic transactions that might affect the control of the CompanyJefferies consistent with their interests as shareholders and consistent with their fiduciary duties. We do not provide for payment ofgross-ups to offset golden parachute excise taxes. Executives who worked for us in periods before April 1, 1997 are also entitled to benefits under our pension plan. In the aggregate, we believe our severance,change-in-control and pension benefits are quite modest compared to general business practices for companies of comparable size and character. We have considered this fact in setting the levels of total direct compensation for senior executives.
We provide the CEO with a driver for his increased business transit, including his commute to several of our different offices, and reimburseprovide fuel and maintenance for the vehicle the CEO purchased in exchange for mileagethe availability of this vehicle for other business purposes when his vehicle is driven on Company business.
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Use of Outside Advisors
Rather than focus executive compensation on performance of the business units within an executive officer’s specific area of expertise, the Compensation Committee views overall firm performance as the best indicator of individual performance of our named executive officers and has therefore tied their individual compensation to firm wide performance as a whole. The Compensation Committee believes this focus creates a greater enhancement to firm-wide profitability and teamwork, a key goal of our compensation policies, rather than a more segmented approach which rewards individual productivity.
Culture of Long-Term Stock Ownership
To date, our CEO has generally elected to defer equity awards under our deferral programs, including restricted stock, restricted stock units, and stock units representing the gain from exercises of stock options. Our Chairman of the Executive Committee has similarly deferred most of his equity awards. These arrangements provide to himthem the advantages of tax deferral, but provide no enhancement by the Company of the net value of histheir restricted stock or restricted stock units or options.units. In this type of deferral arrangement, the Company’s tax deduction is delayed until the year in which the executive recognizes income, and is generally based on the value of shares delivered at the time of settlement of the deferral arrangement. Our insider trading policy precludes short sales, purchases or sales of options and other derivatives, and other transactions that offset or hedge the risk of ownership of our stock.
We have established our DCP and permit the deferral of restricted stock units, option gains and other awards under our Amended and Restated 2003 Incentive Compensation Plan (the “Plan”“Incentive Plan”) as a method for providing our employees advantages of tax deferral and also encouraging long-term retention of equity positions. We believe these policies serve to align the interests of executives with shareholder interests in return on equity and appreciation over time. In this type of deferral arrangement, the Company’s tax deduction is delayed until the close of the tax year in which the executive recognizes income, and is generally based on the value of shares delivered at the time of settlement of the deferral arrangement.
We do not consider gains or losses from equity awards in setting other elements of compensation but the Compensation Committee may consider the effect of the vesting of prior compensation on employee retention.
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In addition, we have established investment entities and permitted executive officers and others to acquire interests in these entities, and have permitted deferred bonus amounts to be deemed invested in those entities. Some of thosethese investment entities are funds we manage, some hold equity securities and derivative instrumentssecurities in companies for which we have provided investment banking and other services, and others that share in the profitability of Jefferies’ High Yield Division, which now operates as Jefferies High Yield Holdings,Trading, LLC. See “Transactions with Related Persons.” We believe that an executive’s participation in these investments helps to further align the executive’s interests with our long termlong-term success and profitability. Our offering these kinds of opportunities also helps us compete for executive talent in the financial services industry, in which our competitors, particularly non-public companies, offer wealth-building investment opportunities as a way to attract and retain executives and producers.
Disparities in Executive Compensation
We view the disparities in compensation between our named executive officers as a result of the relative “market” for each individual employee, our anticipated replacement cost for the employee, and the applicable
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competitive environment. With respect to our Chief Executive Officer and Chairman of the Executive Committee, a significant factor in our Compensation Committee’s determination of the amount of equity-based awards granted is the fact that such producer-executivesthese executives have forgone other internal and external opportunities for increasing their personal earnings that would have arisen if they had focused solely on their production capabilities, but have instead agreed to serve in management roles in addition to producing responsibilities. We recognize the significant compensation these individuals have earned in the past when focusing on their specific business units and understand that our competitors will also consider these production opportunities. As a result, we continue to consider the compensation potential of these two individuals in particular when setting targets and long-term equity compensation that is intended to encourage long-term retention, including the continuing opportunity for the Chairman of the Executive Committee to earn compensation directly from his ownership interest in Jefferies Capital Partners. See “Transactions with Related Persons — Persons—Private Equity Funds.” This is the primary reason for the disparity between the compensation of the CEO and Chairman of the Executive Committee and the other named executive officers.
With respect to Mr. Broadbent, his compensation was negotiated at the time of his hiring and is also not based entirely on the Company’s financial performance. Mr. Hendrickson’s compensation is not tied directly to firm performance in recognition of the fact that he answers directly to Mr. Broadbent, and that his scope of duties does not permit him to influence firm policy and decision making outside his area of direct responsibility in the same manner as the other named executive officers. Mr. Sharp’s compensation was negotiated at the time of his hiring and his bonus is fixed with respect to 2011 performance and variable on a going forward basis. Compensation for all fiveour named executive officers is impacted by competitive considerations, including the Company’s understanding of the cost of replacing these executives with similarly experienced and skilled individuals; in other words, the compensation is impacted by the “market” for such individuals.
Reduction In ForceConsideration of Say-On-Pay Votes
We conducted an advisory shareholder vote on executive compensation at our 2011 annual meeting in which the shareholders approved our compensation packages and approved our recommendation to put our compensation packages to vote once every three years. As a reduction in force the firm commenced in the first half of 2008, management determined that it would be appropriateresult, we will not conduct a Say-On-Pay vote this year and do not plan to waive the non-competition aspectmodify our compensation arrangements as a result of the continued vesting requirement for those who are let go without cause as part of the reduction in force. The Committee concurred with this judgment and delegated to management the authority to waive the non-competition forfeiture event contained in the grant documents for those employees that were terminated as part of a reduction in force and who agreed to the terms of our separation agreement.
Shown below is information concerning the compensation we paid to or amortized in respect of, those persons who were, during 2008,fiscal 2011, our (a) Principal Executive Officer, (b) Principal Financial Officer, and (c) the other three most highly compensated executive officers as specified by SEC rules. The compensation described relates to services provided for us by the individuals for the fiscal year ended December 31, 2008.
18
Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($)(1) (e) | Non-Equity Incentive Plan Compensation (f) | Change in Pension Value and Nonqualified Deferred Compen- sation Earnings ($) (h) | All Other Compen- sation ($) (i) | Total ($) (j) | ||||||||||||||||||||||||
Richard B. Handler Chairman & Chief Executive Officer |
| 2011 2010
2009 | (11 mo)
|
| 1,000,000 916,667
1,000,000 |
|
| — 1,251,632
6,000,000 |
|
| — 5,999,998
— |
|
| — 38,999.995 Consisting of: 2010 related 12,999,981 2011 related 13,000,007 2012 related13,000,007 Total 38,999,995
— |
|
| 27,526 43,671
— | (2)
|
| 141,580 137,158
145,270 | (3)
|
| 1,169,106 47,349,121 Includes Stock Grants: 2009 Related 5,999,999 2010 Related 12,999,981 2011 Related 13,000,007 2012 Related13,000,007 Total 44,999.994 7,145,270 |
| ||||||||
Brian P. Friedman Chairman of the Exec. Committee |
| 2011 2010
2009 | (11 mo)
|
| 750,000 687,500
500,000 |
|
| — 938,724
— |
|
| — 8,999,999
— |
|
| — 29,249.995 Consisting of: 2010 related 9,749,998 2011 related 9,749,998 2012 related9,749,998 Total 29,249,995
— |
|
| — —
— |
|
| 4,163 4,242
4,987 |
|
| 754,163 39,880,460 Includes Stock Grants: 2009 Related 8,999,999 2010 Related 9,749,998 2011 Related 9,749,998 2012 Related9,749,994 Total 38,249,994 504,987 |
| ||||||||
Peregrine C. Broadbent Executive V.P. & Chief Financial Officer |
| 2011 2010 2009 | (11 mo)
|
| 1,000,000 916,667 1,000,000 |
|
| 879,688 900,000 1,312,500 | (4)
|
| — 474,990 687,500 |
|
| — — — |
|
| — — — |
|
| 4,163 4,642 4,515 |
|
| 1,883,851 2,296,299 3,004,515 |
| ||||||||
Michael J. Sharp Executive V.P., Gen. Counsel & Secretary |
| 2011 2010 | (4 mo) |
| 1,000,000 235,256 |
|
| 887,956 550,000 |
|
| — 499,994 |
|
| — — |
|
| — — |
|
| 4,163 — |
|
| 1,892,119 1,285,250 |
| ||||||||
Charles J. Hendrickson Treasurer |
| 2011 2010 2009 | (11 mo)
|
| 325,000 229,167 250,000 |
|
| 317,500 488,374 542,500 |
|
| 82,496 102,486 107,488 |
|
| — — — |
|
| — — — |
|
| 38 117 1,279 |
|
| 725,034 820,144 901,267 |
| ||||||||
| Change in | ||||||||||||||||||||||||||||||||
| Pension | ||||||||||||||||||||||||||||||||
| Value and | ||||||||||||||||||||||||||||||||
| Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||
| Stock | Incentive Plan | Deferred | ||||||||||||||||||||||||||||||
| Awards | Compensation | Compensation | All Other | |||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | ($)(1) | ($)(1) | Earnings ($) | Compensation ($) | Total ($) | ||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (g) | (h) | (i) | (j) | ||||||||||||||||||||||||
| Richard B. Handler | 2008 | 1,000,000 | — | 7,126,652 | — | — | (2) | 367,422 | (3) | 8,494,074 | ||||||||||||||||||||||
| Chairman & Chief | 2007 | 1,002,319 | — | 21,850,638 | — | — | 137,996 | 22,990,953 | ||||||||||||||||||||||||
| Executive Officer | 2006 | 1,000,000 | — | 10,870,672 | 7,908,122 | 8,000 | 114,997 | 19,901,791 | ||||||||||||||||||||||||
| Brian P. Friedman | 2008 | 500,000 | — | 9,349,872 | — | — | 7,752 | 9,857,624 | ||||||||||||||||||||||||
| Chairman of the | 2007 | 500,000 | — | 12,322,292 | — | — | 8,005 | 12,830,297 | ||||||||||||||||||||||||
| Executive Committee | 2006 | 500,000 | — | 5,281,808 | 3,954,024 | — | 3,997 | 9,739,829 | ||||||||||||||||||||||||
| Peregrine C. Broadbent | 2008 | 1,000,000 | 1,300,000 | 5,974,469 | 5,527 | 8,279,996 | ||||||||||||||||||||||||||
| Executive V.P. & Chief | 2007 | 121,795 | 1,300,000 | 128,461 | — | — | — | 1,550,256 | ||||||||||||||||||||||||
| Financial Officer | ||||||||||||||||||||||||||||||||
| Lloyd H. Feller | 2008 | 900,000 | (4) | — | 616,649 | — | — | 20,252 | (5) | 1,536,902 | ||||||||||||||||||||||
| Executive V.P., General | 2007 | 500,000 | 400,000 | 384,786 | — | — | 18,005 | 1,302,791 | ||||||||||||||||||||||||
| Counsel & Secretary | 2006 | 500,000 | 400,000 | 288,694 | 421,731 | — | 13,996 | 1,624,421 | ||||||||||||||||||||||||
| Charles J. Hendrickson | 2008 | 250,000 | 352,500 | 522,263 | — | 7,752 | 1,132,515 | |||||||||||||||||||||||||
| Treasurer | 2007 | 250,000 | 400,000 | 103,199 | 9,505 | 762,704 | ||||||||||||||||||||||||||
| (1) | In accordance with revised disclosure rules, historical years have been restated to show the fair market value of | |
| (2) | The actuarial present value of the accumulated pension benefit | |
| (3) | Includes | |
| (4) | The Compensation Committee Subcommittee approved Mr. Broadbent’s total compensation of $1,975,000 for fiscal 2011, consisting of $1 million in base salary and $975,000 in performance based bonus. The Committee designated 60% of his bonus as | |
19
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The following table describes actions takengrants issued by the Compensation Committee during 2008fiscal 2011 in which it (a) established the ranges of possible compensation for certain of the named executives, and (b) granted shares of restricted stock or restricted stock units as long termlong-term compensation. Due to the difficult financial markets in 2008, none of the threshold performance objectives were achieved and therefore none of the amounts listed below as estimated possible payouts were paid.
| All Other | Grant Date | |||||||||||||||||||||||||||
| Stock Awards: | Fair Value | |||||||||||||||||||||||||||
| Estimated Possible Payouts Under | Number of | of Stock and | ||||||||||||||||||||||||||
| Grant | Non-Equity Incentive Plan Awards | Shares of | Option | |||||||||||||||||||||||||
| Name | Date | Threshold ($) | Target ($) | Maximum ($) | Stock or Units (#) | Awards ($) | ||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (i) | (l) | ||||||||||||||||||||||
| Richard B. Handler | 3/25/2008 | $ | 1,000,000 | $ | 6,000,000 | $ | 11,000,000 | — | — | |||||||||||||||||||
| Brian P. Friedman | 3/25/2008 | $ | 500,000 | $ | 3,000,000 | $ | 5,500,000 | — | — | |||||||||||||||||||
| Peregrine C. Broadbent | 3/25/2008 | — | — | $ | 750,000 | (2) | — | — | ||||||||||||||||||||
| Peregrine C. Broadbent | 12/30/2008 | — | — | — | 50,724 | $ | 699,991 | (1) | ||||||||||||||||||||
| Lloyd Feller | 3/25/2008 | $ | 225,000 | $ | 600,000 | $ | 1,050,000 | — | — | |||||||||||||||||||
| Lloyd Feller | 1/22/2008 | — | — | — | 59,311 | (3) | $ | 999,983 | (3) | |||||||||||||||||||
| Charles J. Hendrickson | 12/30/2008 | — | — | — | 5,253 | $ | 72,491 | (1) | ||||||||||||||||||||
| Charles J. Hendrickson | 1/22/2008 | — | — | — | 5,931 | $ | 99,997 | (1) | ||||||||||||||||||||
Name (a) | Grant Date (b) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (i) | Grant Date Fair Value of Stock and Option Awards ($) (l) | |||||||||||||||||||||
| Threshold ($) (c) | Target ($) (d) | Maximum ($) (e) | Target Shares (#) (g) | |||||||||||||||||||||||
Richard B Handler | 2/9/2011 | 0 | $ | 6,000,000 | $ | 12,000,000 | — | — | — | |||||||||||||||||
Brian P. Friedman | 2/9/2011 | 0 | $ | 4,500,000 | $ | 9,000,000 | — | — | — | |||||||||||||||||
Peregrine C. Broadbent | 11/29/2011 | — | $ | 975,000 | (1) | — | — | — | — | |||||||||||||||||
Michael J. Sharp | 2/9/2011 | 0 | $ | 1,000,000 | (2) | $ | 1,250,000 | — | — | — | ||||||||||||||||
Charles J. Hendrickson | 11/29/2011 | — | $ | 400,000 | — | — | — | — | ||||||||||||||||||
Charles J. Hendrickson | 11/29/2011 | — | — | — | — | 7,674 | (3) | $ | 82,496 | |||||||||||||||||
| (1) | The Compensation Committee Subcommittee approved Mr. Broadbent’s total compensation of $1,975,000 for fiscal 2011, consisting of $1 million in base salary and $975,000 in performance based bonus. The committee designated 60% of his bonus as payable in cash and 40% payable in restricted equity. The Committee permitted Mr. Broadbent to participate in its firm-wide policy offering employees the choice to receive 2011 restricted equity awards as restricted cash awards at a 25% discount. Mr. Broadbent elected to receive his restricted equity award in the form of restricted cash and was therefore paid a total cash bonus of $879,688. |
| (2) | Compensation relates to 2011 performance and was established in advance through Mr. Sharp’s employment agreement on the terms described below. |
| (3) | Shares granted on | |
The following provides background information to give a better understanding of the compensation amounts shown in the Summary Compensation Table and Grants of Plan-Based Awards Table above.
In additionearly 2011, the Committee established a 2011 Pay for Performance program for Mr. Handler that included a Base Salary, Cash Bonus and Long-Term Equity Incentive. According to the grants described inPay for Performance program for Mr. Handler, his bonus would have been $4,879,565, but Mr. Handler requested that the table above, on August 25, 2006 we granted shares which were viewed byCommittee exercise its negative discretion to reduce this award to zero. The subcommittee of the Compensation Committee asaccepted Mr. Handler’s proposal and awarded him no cash bonus for fiscal 2011. As a component of 2008 compensationresult, for the 2011 fiscal year, Mr. Handler and Mr. Friedman. For these executives, the grants formed one component of their overall compensation packages which included salary, annual bonuses based on achievement of certain performance criteria, and grants of restricted stockwas compensated as long-term equity incentives which were intended to both align the interests of the executive with those of shareholders and to promote retention and long-term service to the Company. follows:
Base Salary | Bonus | Long-Term Equity Incentive | ||
$1,000,000 | $0 | $13 million |
The August 2006 grants constitute the entire Long-Term Equity Incentive for Messrs. Handler and Friedman for 2008 and are describedwas granted in detail below.
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0 and 503,290 restricted stock units (onare subject to forfeiture for each performance year depending on the Company’s performance for that year. In addition, the aggregate grant is subject to annual vesting over a split-adjusted basis), valued at $13 million at3 year period from grant date.
The restricted stock unit agreements contain a provision that time.provides that the RSUs will vest if Mr. Handler hasHandler’s employment is terminated by reason of his death or disability. The agreements also contain a provision that provides that the RSUs will continue to vest if we terminate his employment without Cause (as defined in the agreement) and he does not compete with the Company. Unlike the standard grant given as part of our year-end compensation process, if he terminates his employment other than by death or disability, the unvested restricted stock and restricted stock units will be forfeited.
Brian Friedman 2011 Compensation
In early 2011, the Committee established a 2011 Pay for Performance program for Mr. Friedman that included a Base Salary, Cash Bonus and Long-Term Equity Incentive. According to the Pay for Performance program for Mr. Friedman, his bonus would have been $3,659,674, but Mr. Friedman requested that the Committee exercise its negative discretion to reduce his award to zero. The subcommittee of the Compensation Committee reduce his future compensation by the number of shares heaccepted Mr. Friedman’s proposal and awarded him no cash bonus for fiscal 2011. As a result, for fiscal 2011, Mr. Friedman was compensated as follows:
Base Salary | Cash Bonus | Long-Term Equity Incentive | ||
$750,000 | $0 | $9,750,000 |
The Long-Term Equity Incentive was granted in 2006 in respectthe form of 2008. Thea single grant wasintended to cover the 2010, 2011 and 2012 compensation years. An aggregate of 1,132,404 Long-Term Performance-Linked Restricted Stock Units were granted on January 19, 2010. One-third of the aggregate grant is subject to 2007 performance criteria and vested 20% on January 22, 2008 when the
20
The restricted stock unit agreement contains a provision that time. Mr. Friedman has requestedprovides that the Compensation Committee reduceRSUs will vest if Mr. Friedman’s employment is terminated by reason of his future compensation by the number of shares he was granted in 2006 in respect of 2008.death or disability. The grant was subject to 2007 performance criteria. The grant vested 20% on January 22, 2008 when the Compensation Committee certifiedagreement also contains a provision that provides that the 2007 performance criteria had been met, 20% on August 25, 2008,RSUs will continue to vest if we terminate his employment without Cause (as defined in the agreement) and he does not compete with the Company. Unlike the standard grant given as part of our year-end compensation process, if he terminates his employment other than by death or disability, the unvested restricted stock and restricted stock units will vest 20% on August 25 of each of 2009, 2010 and 2011.
The compensation arrangement for Mr. Broadbent for 2011 was as follows:
Base Salary | Cash Bonus | Long-Term Equity Incentive | ||
$1,000,000 | $879,688 | $0 |
The Compensation Committee Subcommittee approved Mr. Broadbent’s total compensation of $1,975,000 for fiscal 2011, consisting of $1 million in base salary and $975,000 in performance based bonus. The committee designated 60% of his bonus as payable in cash and 40% payable in restricted equity. The Committee permitted Mr. Broadbent to participate in its firm-wide policy offering employees the choice to receive 2011 restricted equity awards as restricted cash awards at a 25% discount. Mr. Broadbent elected to receive his restricted equity award in the form of restricted cash and was therefore paid a total cash bonus of $879,688. Mr. Broadbent’s total compensation was determined by the Committee based on their subjective view his performance in a difficult financial environment, was not based upon an objective or formulaic approach and did not reference the targets or weighting described below.
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Michael J. Sharp 2011 Compensation
Mr. Sharp joined us as our Chief Financial Officer on October 11, 2007,in July of 2010 and the terms of his compensation arrangement was governed by his employment agreement with us through December 31, 2008. His employment agreemement provided2011. Mr. Sharp’s compensation for 2008 as follows:
| Guaranteed Cash | Performance-Based | Guaranteed Long-Term | ||||
Base Salary | Bonus | Bonus Range | Equity Incentive | |||
| $1,000,000 | $1,300,000 | $0 to $750,000 | $700,000 |
Base Salary | Cash Bonus | Long-Term Equity Incentive | ||
$1,000,000 | $887,956 | $0 |
Mr. Broadbent received the $2,000,000 guaranteed bonus called for by his employment agreement, payable $1,300,000 in cash and $700,000 in shares of restricted stock, butSharp did not receive any additional annual bonus with respect to 2008. The restricted shares vest 25% on December 30 of each of 2010, 2011, 2012 and 2013.
Base Salary | Bonus Range | Long-Term Equity Incentive | ||
| $900,000 | $0 to $1,050,000 | $1,000,000 |
The compensation arrangement for Mr. Hendrickson for 2011 was as follows:
Base Salary | Bonus | Long-Term Equity Incentive | ||
| $250,000 | $352,500 | $172,491 |
Base Salary | Cash Bonus | Long-Term Equity Incentive | ||
$325,000 | $317,500 | $82,500 |
Mr. Hendrickson receivedHendrickson’s $400,000 target bonus was paid in a combination of cash bonus and long-term equity incentive grantincentive. Mr. Hendrickson’s annual bonus was determined by the Committee based on January 22, 2008 of 5,931 restricted stock units, valued at $100,000 at that time. The restricted stock units vested 25% on January 22, 2009their subjective view his performance in a difficult financial environment, was not based upon an objective or formulaic approach and did not reference the remainder will vest 25% on January 22 of each of 2010, 2011 and 2012. Mr. Hendrickson also received a long-term equity incentive grant of 5,253 shares of restricted stock, valued at $72,491 at that time. The shares will vest 25% on December 30 of each of 2009, 2010, 2011 and 2012.
21
We generally do not enter into employment agreements with our named executive officers after the initial employment agreement negotiated when they are hired.hired and we presently have no employment agreements with our named executive officers. During fiscal 2011 Mr. Broadbent’s compensationSharp was governed by histhe only named executive officer with an employment agreement, during all of 2008. His agreement expired onwhich remained in effect through December 31, 2008 and his employment is no longer governed by an employment agreement.
Performance Criteria and Targets
All of the incentive plans and arrangements described above that result in the issuance of restricted stock and restricted stock units have been adopted pursuant to our Amended and Restated 2003 Incentive Compensation Plan (the “Plan”) as approved by our shareholders. If we pay dividends on our common stock in a given quarter, we alsoWe pay dividends on restricted stock and credit dividend equivalents on restricted stock units. We have implemented a program under the Plan permitting employees and executive officers to defer equity awards, including restricted stock units. Deferrals of restricted stock units enable the employee to specify that shares will be delivered in
22
Options
We have not granted options to our executive officers since January 2003 and although our 2003Incentive Plan still permits us to grant options, at the present time, we do not view options as a desirable method of compensation. None of our named executive officers had any options outstanding as of December 31, 2008.
| Stock Awards | ||||||||
| Market | ||||||||
| Number of | Value of | |||||||
| Shares or | Shares or | |||||||
| Units of | Units of | |||||||
| Stock That | Stock That | |||||||
| Have Not | Have Not | |||||||
| Name | Vested (#) | Vested ($) | ||||||
(a) | (g) | (h) | ||||||
| Richard B. Handler | 742,600 | (1) | $ | 10,440,956 | ||||
| Brian Friedman | 626,876 | (2) | $ | 8,813,877 | ||||
| Peregrine C. Broadbent | 263,632 | (3) | $ | 3,706,666 | ||||
| Lloyd H. Feller | 81,237 | (4) | $ | 1,142,192 | ||||
| Charles Hendrickson | 24,006 | (5) | $ | 337,524 | ||||
| Stock Awards | ||||||||||||||||
Name (a) | Number of Shares or Units of Stock That Have Not Vested (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested ($) (h) | Equity Incentive Plan Awards: Number Of Unearned Shares, Units or Other Rights That Have Not Vested (#) (i) | Equity Incentive Plan Awards: Market or Payout Value Of Unearned Shares, Units or Other Rights That Have Not Vested ($) (j) | ||||||||||||
Richard B. Handler | 1,692,625 | (1) | $ | 19,363,626 | — | — | ||||||||||
Brian Friedman | 1,392,586 | (2) | $ | 15,931,184 | — | — | ||||||||||
Peregrine C. Broadbent | 119,845 | (3) | $ | 1,371,027 | — | — | ||||||||||
Michael J. Sharp | 16,012 | (4) | $ | 183,177 | — | — | ||||||||||
Charles Hendrickson | 20,287 | (5) | $ | 232,083 | — | — | ||||||||||
| (1) | Of these stock awards, | |
| (2) | Of these stock awards, | |
| (3) | Of these RSU awards, 53,227 will vest on | |
| (4) | Of these RSU awards, | |
| (5) | Of these RSU awards, |
23
The table below reflects the restricted stock or RSUs which becamenon-forfeitable (vested) during 2008fiscal 2011 for each of the named executive officers. Shares are valued on the day they became vested.
| Option Awards | Stock Awards | |||||||||||||||
| Number of | Number of | |||||||||||||||
| Shares | Value | Shares | Value | |||||||||||||
| Acquired on | Realized on | Acquired on | Realized on | |||||||||||||
| Name | Exercise (#) | Exercise ($) | Vesting (#) | Vesting ($) | ||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||
| Richard B. Handler | — | — | 1,454,721 | (1) | $ | 26,894,081 | ||||||||||
| Brian Friedman | — | — | 633,005 | (2) | $ | 11,209,420 | ||||||||||
| Peregrine Broadbent | — | — | 53,227 | $ | 586,029 | |||||||||||
| Lloyd H. Feller | — | — | 7,308 | $ | 218,144 | |||||||||||
| Charles Hendrickson | — | — | 4,669 | $ | 79,653 | |||||||||||
| Option Awards | Stock Awards | |||||||||||||||
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | Number of Shares Acquired on Vesting (#) (d) | Value Realized on Vesting ($) (e) | ||||||||||||
Richard B. Handler | — | — | 324,892 | $ | 6,281,477 | |||||||||||
Brian Friedman | — | — | 259,824 | (1) | $ | 5,709,722 | ||||||||||
Peregrine Broadbent | — | — | 73,138 | (2) | $ | 1,033,105 | ||||||||||
Michael J. Sharp | — | — | 5,337 | (3) | $ | 80,909 | ||||||||||
Charles Hendrickson | — | — | 8,299 | (4) | $ | 187,541 | ||||||||||
| (1) | Includes | |
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| (2) | Includes |
| (3) | Reflects RSUs the settlement of which has been deferred until |
| (4) | Includes 1,186 RSUs the settlement of which has been deferred until February 15, |
| Number of | Present | |||||||||||||
| Years | Value of | Payments | ||||||||||||
| Credited | Accumulated | During Last | ||||||||||||
| Name | Plan Name | Service (#) | Benefit ($) | Fiscal Year ($) | ||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||
| Richard B. Handler | Jefferies Group, Inc. Employees’ Pension Plan | 16 | $ | 115,464 | $ | 0 | ||||||||
Name (a) | Plan Name (b) | Number of Years Credited Service (#) (c) | Present Value of Accumulated Benefit ($) (d) | Payments During Last Fiscal Year ($) (e) | ||||||||||
Richard B. Handler | Jefferies Group, Inc. Employees’ Pension Plan | 16 | $ | 185,479 | $ | 0 | ||||||||
To calculate the values in the table above, we needed to make certain assumptions about the employees, their retirement age, interest rates and discount rates, as follows:
Benefit commencement is at age 65, our Pension Plan’s normal retirement age.
Benefit is paid as a lump sum.
GATT actuarial basis as of November 30, 2011 was used to determine the lump sum amount at age 65, including an interest rate of 4.75%.
The benefit is discounted to the employee’s age at November 30, 2011 using a discount rate of 4.75%.
No pre-retirement decrements (other than discount rate) have been assumed in determining the Present Value of Accumulated Benefits.
We first adopted our pension plan in 1964 and stopped admitting new participants into the plan on April 1, 1997. Effective December 31, 2005, benefits under the Pension Plan were frozen. All persons who were our employees prior to April 1, 1997, who are citizens or residents of the United States, who are 21 years of age, and who have completed one year of service are covered by our pension plan. The plan is a defined benefit plan, and is funded through our ongoing contributions and through earnings on existing plan assets. The amount an employee
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The amount of covered compensation used to calculate the benefit earned in a given year includes salaries, bonuses and commissions, but is capped each year. Since 2004, the amount of covered compensation has been capped at $210,000 per year. An employee who retires upon normal retirement at age 65 with at least four years of service will receive a full vested benefit. An employee who retires at age 55 with at least four years of service will receive the normal retirement benefit reduced by1/2% for each month benefit payments commence before age 65. Employees who terminate employment with us for reasons other than death or retirement will be entitled to the vested portion of their benefits at their normal or early retirement age. Benefits vest at the rate of 0% for the first year of service, 33% for each of the next two years of service, and 34% for the fourth year of service. The retirement benefits payable at age 65 for those employees with service prior to January 1, 1987, will be composed of two items: (1) a benefit for service up to December 31, 1986, in accordance with the original Pension Plan formula recognizing pay as the average of 1985 and 1986 compensation up to $100,000, and (2) a benefit for service commencing on January 1, 1987, equal to 1% of covered compensation through the date of termination.
| Aggregate | Aggregate | |||||||||||||||||||
| Executive | Registrant | Earnings | Balance | |||||||||||||||||
| Contributions | Contributions | in Last | Aggregate | At Last | ||||||||||||||||
| Name | in Last FY ($) | in Last FY ($) | FY ($) | Withdrawals/ | FYE ($)(1) | |||||||||||||||
(a) | (b) | (c) | (d) | Distributions ($) | (f) | |||||||||||||||
| Richard B. Handler | — | $ | 26,393,105 | (2) | $ | (87,670,950 | )(3) | $ | 500,976 | $ | 153,958,516 | (4) | ||||||||
| Brian Friedman | — | $ | 11,209,420 | (2) | $ | (7,826,071 | )(5) | — | $ | 15,259,551 | (6) | |||||||||
| Peregrine C. Broadbent | — | $ | 586,029 | (2) | $ | 218,791 | (7) | — | $ | 804,820 | ||||||||||
| Lloyd H. Feller | $ | 125,000 | $ | 230,644 | (8) | $ | (414,571 | )(9) | $ | 161,298 | $ | 817,787 | (10) | |||||||
| Charles Hendrickson | — | $ | 79,653 | (2) | $ | (38,822 | )(11) | — | $ | 163,549 | (12) | |||||||||
Name (a) | Executive Contributions In Last FY ($) (b) | Registrant Contributions In Last FY ($) (1) (c) | Aggregate Earnings In Last FY ($) (d) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance At Last FYE ($) (2) (f) | |||||||||||||||
Richard B. Handler | — | $ | 3,507,649 | -$ | 99,832,131 | (3) | $ | 23,365,005 | $ | 105,183,446 | (4) | |||||||||
Brian Friedman | — | $ | 5,709,722 | -$ | 11,029,502 | (5) | — | $ | 13,179,895 | (6) | ||||||||||
Peregrine C. Broadbent | — | $ | 534,931 | -$ | 1,995,888 | (7) | — | $ | 2,577,012 | (8) | ||||||||||
Michael J. Sharp | — | $ | 80,909 | -$ | 16,339 | (7) | — | $ | 66,112 | (8) | ||||||||||
Charles Hendrickson | — | $ | 126,418 | -$ | 215,185 | (7) | $ | 411,134 | $ | 44,706 | (8) | |||||||||
| (1) | The Registrant Contribution column reflects the value of RSUs which vested but by their terms will not be distributed until a later date. RSUs are subject to a mandatory period following vesting during which they are not distributed. We have chosen to show this mandatory deferral as a Registrant Contribution, but the value of the RSUs at the vesting date is reflected in full in the Options Exercised and Stock Vested table as compensation to the named executive officer. |
| (2) | Amounts in the table do not reflect compensation granted in any single year but include reported compensation that has been deferred and market returns on investments that deferred amounts were deemed invested in which have accrued over time. Specifically, amounts in the table consist of (i) contributions resulting from compensation which has been disclosed in | |
| (3) | Includes | |
| (4) | Includes |
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| (5) | Includes | |
| (6) | Includes |
| (7) | Reflects the decrease in value of RSUs and dividend reinvestments on RSUs. | |
| (8) | Reflects the value of RSUs | |
The amounts of deferred compensation in the table above reflect compensation that was paid to each named executive officer historically, and reported as compensation at the time to the extent required under SEC rules then in effect, but for which the actual receipt of the compensation has been deferred. A substantial portion of the
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value listed above was derived from the value of deferred stock or other investments after the compensation was credited to the employee and were not the amounts we actually paid the executive. When an executive’s deferred compensation is not denominated in cash, but is deemed invested in a particular fund or security, the executive’s deemed investment subjects their earnings to market risk that may produce gain or loss depending on the performance of the investments selected.
Deferred Compensation Plan
We provide an opportunity for executives to defer receipt of cash portions of annual bonus awards, and to have deferred amounts be deemed invested in specified investment vehicles during the period of deferral. The Company has implemented the Jefferies Group, Inc. Deferred Compensation Plan (the “DCP”), which permits executive officers and other eligible employees to defer cash compensation, some or all of which may be deemed invested in stock units. A portion of the deferrals may also be directed to notional investments in a money market fund or certain of the employee investment opportunities described under the caption “Transactions with Related Persons.” We believe this discount encourages employee participation in the DCP and accordingly, enhances long termlong-term retention of equity interests and alignment of executive interests with those of shareholders. The amounts of 2008 salary, bonus and non-equity incentive plan compensation deferred by named executive officers are reflected in the Summary Compensation Table without regard to deferral. TheIn years in which the named executive officers defer a portion of their compensation, the portion of the deferrals under the DCP representing the value of the discount on stock units is reflected in the Summary Compensation Table in the column captioned “All Other Compensation” and in the table above in the column captioned “Registrant Contributions in Last FY.”
The DCP provides eligible employees with the opportunity to defer receipt of cash compensation for five years, with an optional deferral of an additional five years. Participants chose whether their deferred compensation is allocated to a cash denominated investment subaccount, to an equity subaccount which permits amounts to be deemed to be invested in a combination of stock units or other specified equity investment vehicles. Credits of stock units to a participant’s subaccount occur at a predetermined discount of up to 15% of the volume weighted average market price per share of our common stock on the last day of the quarter. The predetermined discount amount for 2008fiscal 2011 was 10%. The discounted portion of any amounts credited, or the additional stock units credited as a result of those discounts, is forfeitable upon termination of employment until the earliest of the time the participant has participated in the DCP for three consecutive years, the participant’s age plus the number of years of service
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Richard Handler Deferred Compensation Plan
We established an individual Deferred Compensation Plan for Mr. Handler while he was Head of the High Yield Division, before implementing our generally applicable Deferred Compensation Plan and prior to his becoming an executive officer. Amounts deferred under this individual plan reflect compensation paid to him as a department head for the High Yield Division and were based on the productivity of that division. The last deferral into Mr. Handler’s individual Deferred Compensation Plan was in 2000.
No Single-Trigger Policies or Agreements
We do not have any single-trigger policies or agreements that would entitle an executive to a payment or enhanced rights solely as a result of a change in control, and the way our named executive officers are treated is generally the same as our other employees are treated in this regard. There are a number of aspects of the relationship with the named executive officers that may result in payments if a change in control occurs and the
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employee is terminated without cause. Those payments result from the application of generally applicable policies or contractual terms and not from any payment or benefit levels which were determined by independent analysis. To understand when those payments are triggered, we have described below the types of agreements, relationships or investments that may require payments to the named executive officers upon termination of employment. Following these descriptions, we also provide a summary of the amounts that would have been payable to each named executive officer as a specific result of termination if the person’s employment had been terminated on December 31, 2008November 30, 2011 under various circumstances. We anticipate that all of the payments described in this section will be subject to applicable taxes and withholding requirements and no payments will be made to employees until applicable tax requirements have been met. As a result, the actual amount paid to the employees will be substantially less than the amounts set forth below. We also anticipate that we will receive the positive benefits of a corresponding tax deduction which is also not accounted for in the analysis or tables below.
Description of Agreements, Relationships and Investments
Restricted Stock and Restricted Stock UnitsAgreements
Under the terms of the restricted stock agreements entered into by our named executive officers, the restrictions on restricted stock will lapse and the restricted stock will immediately vest if employment is terminated by the Company without “cause” following a change in control. Under the terms of the restricted stock unit agreements entered into by our named executive officers, the RSUs will immediately vest and be distributed if employment is terminated by the Company without “cause” following a change in control. Such distribution may be subject to delay to comply with Code Section 409A. The vesting terms of restricted stock and RSUs no longer provide for forfeiture upon the employee voluntarily quitting, but provide for forfeiture in the event of competition following termination, so the effect of a termination not for cause following a change in control is to cause a lapse of the non-competition obligation.
Except when otherwise decided by the compensation committeeCompensation Committee or required by an employment agreement, our policy applicable to all continuing employees is that equity grants will continue to vest normally following a termination without “cause” that is not following a change in control.
Deferred Compensation Plan
Amounts that executive officers have deferred through the Jefferies Group, Inc. Deferred Compensation Plan (the “DCP”)our DCP would continue to be deferred through the expiration of the applicable deferral period and at the conclusion of that period, would result in a payment to the former executive of the deferred amounts. In some cases
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Early withdrawals are generally not permitted except in the event of an unexpected hardship. An employee is permitted to request an unscheduled withdrawal of certain balances resulting from deferrals before 2005, but 10% of the amount withdrawn will be forfeited. If we experience a change in control, deferred amounts will not be automatically distributed and changes in the plan will be prohibited for a period of 24 months. Unscheduled withdrawals permitted for balances resulting from deferrals before 2005 may be made within two years of a change in control at a reduced forfeiture percentage of 5% of the amount withdrawn.
If an employee dies before payment of deferred amounts has begun, all unvested restricted stock shares or options under the DCP will immediately vest and the balance of any deferred amounts will be paid to the designated beneficiary in January following the year of death. If payment of deferred amounts has already begun, the beneficiary will continue to receive payments in the same manner the employee had elected before his or her death.
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Richard Handler Deferred Compensation Plan
We established an individual Deferred Compensation Plan for Mr. Handler while he was Head of the High Yield Division, before implementing our generally applicable Deferred Compensation Plan and prior to his becoming an executive officer. Amounts deferred under this individual plan reflect compensation paid to him as a department head for the High Yield Division and were based on the productivity of that division. The last deferrals into Mr. Handler’s individual Deferred Compensation Plan waswere in 2000. With respect to amounts deferred through this plan, we may determine to terminate a portion of his deferred compensation arrangement in the event of a change in control and make a full distribution of the deferred amounts, to the extent permitted under Code Section 409A. The decision to terminate the deferral arrangement must be made by our Board of Directors prior to consummation of the transaction that constitutes a change in control. If a change in control had occurred on December 31, 2008November 30, 2011 and the boardBoard had elected to make a full distribution, Mr. Handler would have received a payment of $38,452,395$18,059,052 in settlement of his individual Deferred Compensation Plan. This amount would be in addition to any unscheduled payout he is entitled to receive under our DCP as discussed above. Absent a change in control, Mr. Handler’s deferrals under this Plan generally will be settled upon his termination of employment, although settlement may be delayed for up to six months if required undersubject to Code Section 409A.
High Yield Trading Desk Investments
Our employees have the reorganization of our high yield funds, Jefferies Employees Special Opportunity Partners, LLC (“JESOP”) was formed to permit employeesopportunity to invest in the continuing operations of our high yield trading desk.desk through Jefferies Employees Special Opportunity Partners, LLC (“JESOP”). Investors in JESOP would have the right to redeem their investment should Mr. Handler cease actively managing the high yield trading desk. If an executive officer other than Mr. Handler is terminated, we anticipate that we would repurchase that person’s interest in JESOP at his or her current capital account balance.
Mr. Handler’s investments in JESOP are in the form of deferred compensation arrangements which follow the performance of JESOP. As a result, a liquidation of the fund would not result in a cash payout to Mr. Handler unless the circumstances also resulted in a payout of his deferred compensation as described above.
Severance PolicyPayments
We do not have adopted a firm-wide severance policy, that appliesbut generally follow certain practices when establishing severance payments which apply to all our employees if they are laid off, including our named executive officers, if they are laid off. Itofficers. Our current practice is not paid to pay employees who resign voluntarily or are terminated for cause. Employees are eligible for two weeks of severance for each year of service, up to a maximum of six months pay. For employees who are retirement eligible (the individual has served at least twelve years with us and their age plus years in service is greater than 60) the maximum severance payment is generally increased to twelve months. As of November 30, 2011, Mr. Handler was the only named executive officer who was retirement eligible. We generally do not pay severance to employees who resign voluntarily or are terminated for cause. If
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| Richard B. Handler | $ | 500,000 | ||
| Brian Friedman | $ | 154,514 | ||
| Peregrine C. Broadbent | N/A | |||
| Lloyd H. Feller | $ | 228,125 | ||
| Charles Hendrickson | $ | 26,042 |
Richard B. Handler | $ | 916,667 | ||
Brian Friedman | $ | 312,500 | ||
Peregrine C. Broadbent | $ | 166,667 | ||
Charles Hendrickson | $ | 67,708 |
Our general severance policypractice was not applicable tosuperseded by Mr. Broadbent during 2008 due to hisSharp’s employment agreement but became applicable to Mr. Broadbent in January 2009.
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Garden Leave Policy
We provide benefits to all our employees, including our named executive officers, that may result in payments to employees or their estates after their death, retirement or termination of employment. These benefits include our medical and dental plans, long termlong-term disability plan, life insurance and business travel insurance.
Our medical and dental plans provide that following the death or termination of an employee, the employee or his or her dependents may continue coverage in our medical and dental plans on a month to month basis for 18 to 36 months. To remain in the plans during this period, the person would be required to pay the same premium we had previously been paying for the coverage, plus a 2% charge for administrative expenses. Following retirement, a former employee who satisfies age and years of service criteria may continue in the Jefferies medical plan at a retiree premium rate.
If an executive becomes permanently disabled, the individual will be entitled to participate in our Long-Term Disability insurance program. ThisOur basic program entitles a disabled employee to receive 60% of his or her aggregate earnings up to a maximum of $10,000 per month until reaching age 65 and in some cases, for a short period thereafter. Employees are also eligible to purchase additional coverage through our negotiated rates at their own cost. Employees are entitled to continue this coverage after termination by completing appropriate documentation and paying premiums directly to the carrier.
We provide life insurance to our employees which would result in a payment to an employee’s designee upon death. Our basic insurance policy would cover each employee for the amount of his or her annual compensation up to $200,000 through age 65. Once an employee reaches age 65, with age based reductions in the covered amount thereafter.basic life insurance benefit will be reduced to 65% of the coverage amount. Employees are also eligible to purchase additional coverage through our negotiated rates at their own cost. Retirees who meet certain eligibility requirements and who choose to participate in our retiree medical policy have a life insurance benefit of $10,000. Employees who are terminated may elect to continue coverage after employment for both the basic coverage and any additional coverage they have purchased at their own expense.
We also provide business travel accident insurance to all our employees. Theemployees with a benefit would result in a payment of $250,000 in the event of an employee’s death as the result of an accident while traveling ontraveling. For our business.
Summary of Payments on Termination After a Change in Control
As described above, certain of our policies or agreements would result in payments to a named executive officer or enhancement of rights if the person is terminated without cause following a change in control, but we do not have any single-trigger policies or agreements that would entitle an executive to a payment or enhanced rights solely as a result of a change in control and we treat our named executive officers generally the same way we treat other employees in this regard. The table below shows the estimated value of the enhancements to payments
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If an executive has received a restricted stock unit or share of restricted stock which has fully vested and is non-forfeitable, or holds vested and deferred stock units that are similarly non-forfeitable, the executive would retain that interest following termination and we therefore do not view the retention of those interests as resulting in a payment or enhancement of rights on termination.
Shares of restricted stock or restricted stock units which immediately vest if the executive is terminated following a change in control are valued at $11.44 per share, the closing price of our common stock on November 30, 2011.
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The value of restricted stock units that remain unvested and do not accelerate is not included in the totals below but will continue to vest according to their terms. For the purposes of the table below we have also assumed that the executive complies with any post-termination non-competition and similar obligations under the “continued vesting” provisions described above.
Amounts an employee has deferred through our DCP will continue to be deferred and therefore will not result in a payment upon termination in the table below.
Each employee agreed to sign our standard settlement and release agreement as required under his or her restricted stock or restricted stock unit agreements.
No payment to a named executive officer would need to be reduced so that the executive and Jefferies would avoid adverse tax consequences under Code Sections 4999 and 280G. As discussed above, some of our stock awards contain a “cut-back” provision of this type. We have no obligation to any named executive officer to pay a “gross-up” to offset golden parachute excise taxes under Code Section 4999 or to reimburse the executive for related taxes.
Any withdrawals from an employee’s profit sharing plan or ESOP account, or the decision of an employee to transfer balances into another qualified account are entirely within the discretion of the employee, will not result in a payment by us, and are not included in the table below.
Except as otherwise indicated all amounts reflected in the table would be paid on a lump sum basis.
The named executive officers have satisfied all applicable requirements for receiving severance payments in accordance with our generally applicable severance practices.
| Retirement or | Involuntary | |||||||||||
| Voluntary | Termination | |||||||||||
| Termination by | Involuntary | following a Change | ||||||||||
| Employee | Termination | in Control | ||||||||||
| Richard B. Handler | — | $ | 500,000 | $ | 9,711,690 | (1) | ||||||
| Brian Friedman | — | $ | 154,514 | $ | 5,518,924 | (2) | ||||||
| Peregrine C. Broadbent | — | $ | 4,993,486 | $ | 4,993,486 | (3) | ||||||
| Lloyd H. Feller | — | $ | 228,125 | $ | 433,654 | (4) | ||||||
| Charles C. Hendrickson | — | $ | 26,042 | $ | 306,384 | (5) | ||||||
| Retirement or Voluntary Termination by Employee | Involuntary Termination | Involuntary Termination following a Change in Control | ||||||||||
Richard B. Handler | — | $ | 916,667 | $ | 916,667 | (1) | ||||||
Brian Friedman | — | $ | 312,500 | $ | 8,135,103 | (2) | ||||||
Peregrine C. Broadbent | — | $ | 166,667 | $ | 2,602,334 | (3) | ||||||
Michael Sharp | — | $ | 1,132,189 | $ | 1,132,189 | (4) | ||||||
Charles C. Hendrickson | — | $ | 67,708 | $ | 108,412 | (5) | ||||||
| (1) | Consists of |
| (2) | Consists of $7,822,603 in restricted stock units which would immediately become vested and |
Consists of |
| (4) | Consists of $244,233 in restricted stock units which would immediately become vested and |
Consists of |
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| Fees | ||||||||||||||||
| Earned or | Stock | All Other | ||||||||||||||
| Paid in | Awards | Compensation | ||||||||||||||
| Name | Cash ($) | ($)(1) | ($)(2) | Total ($) | ||||||||||||
(a) | (b) | (c) | (g) | (h) | ||||||||||||
| W. Patrick Campbell | $ | 85,000 | $ | 98,990 | (3) | — | $ | 183,990 | ||||||||
| Ian M. Cumming | $ | 45,000 | $ | 100,000 | (4) | — | $ | 145,000 | ||||||||
| Richard G. Dooley | $ | 75,000 | (5) | $ | 100,000 | (6) | $ | 3,000 | $ | 178,000 | ||||||
| Robert E. Joyal | $ | 73,750 | $ | 105,833 | (7) | — | $ | 179,583 | ||||||||
| Frank Macchiarola(8) | $ | 18,750 | — | — | $ | 18,750 | ||||||||||
| Michael T. O’Kane | $ | 72,500 | $ | 91,667 | (9) | — | $ | 164,167 | ||||||||
| Joseph S. Steinberg | $ | 45,000 | $ | 77,778 | (4) | — | $ | 122,778 | ||||||||
Name (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($) (1) (c) | All Other Compensation ($) (2) (g) | Total ($) (h) | ||||||||||||
W. Patrick Campbell | $ | 85,000 | $ | 100,000 | (3) | — | $ | 185,000 | ||||||||
Ian M. Cumming | $ | 65,000 | $ | 100,000 | (4) | — | $ | 165,000 | ||||||||
Richard G. Dooley | $ | 75,000 | (5) | $ | 100,000 | (6) | $ | 3,000 | $ | 178,000 | ||||||
Robert E. Joyal | $ | 75,000 | $ | 100,000 | (7) | $ | 500 | $ | 175,500 | |||||||
Michael T. O’Kane | $ | 72,500 | $ | 100,000 | (8) | — | $ | 172,500 | ||||||||
Joseph S. Steinberg | $ | 65,000 | $ | 100,000 | (9) | — | $ | 165,000 | ||||||||
| (1) | Amounts reflect the | |
| (2) | Amounts shown in the All Other Compensation column are the amounts we contributed in | |
| (3) | At | |
| (4) | At November 30, 2011, Mr. Cumming held 8,572 unvested | |
| (5) | Amounts were credited as deferred shares under our DSCP. | |
| (6) | At |
| (7) | At November 30, 2011, Mr. Joyal held 8,572 unvested deferred shares. |
| (8) | At November 30, 2011, Mr. O’Kane held 8,572 unvested deferred shares. |
| (9) | At November 30, 2011, Mr. Steinberg held 8,572 shares of unvested restricted | |
Each member of theour Board of Directors of Jefferies Group, Inc. who is also a non-employee is entitled to receive the following compensation under the terms of policiesas approved by the Board from timepursuant to time and the terms of the Jefferies Group, Inc. 1999 Directors’ Stock Compensation Plan:
an annual retainer of $50,000; | ||
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an annual retainer of $7,500 for each non-Chair committee membership;
an annual retainer of $20,000 to the Chairman of the Audit Committee; and
an annual retainer of $10,000 to the Chairman of the Compensation Committee and the Chairman of the Governance and Nominating Committee.
Annual retainers are paid quarterly in equal installments. Under our 1999 Directors’ Stock Compensation Plan (the “DSCP”),DSCP, each non-employee Director may elect to receive annual retainer fees in the form of cash, deferred sharescash or deferred cash.shares. If deferred cash is elected, the Director’s account is credited with interest on deferred cash at the prime interest rate in effect at the date of each annual meeting of shareholders. None of our directors have elected to receive deferred cash. If deferred shares are elected, the Director’s account is credited with the number of deferred shares having a market value equal to the deferred fees and, when dividends are declared and paid on our common stock, with dividend equivalents on deferred shares which are then deemed reinvested as additional deferred shares.
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Directors who are also our employees are not paid directors’ fees and are not granted restricted stock or deferred shares for serving as directors.
We offer a program to all employees to encourage charitable giving, and each director is also permitted to participate in our Charitable Gifts Matching Program. Under the program, we will match 50% of allowable charitable contributions made by an employee or director, up to a maximum matching contribution of $3,000 per person per year.
The children of directors may also participate (along with the children of all our employees) in the Jefferies Family Scholarship program which provides scholarship awards for secondary and post-secondary education based on factors such as financial need, academic merit and personal statements. The grants are made by an independent scholarship committee, none of whose members are affiliated with us.
The Board has discussed whether our compensation policies are reasonably likely to have a material adverse effect on our results. The Board noted that, consistent with our performance-based model, many of our employees receive a significant portion of their compensation through commission-based, net-revenue-based, profit-based or discretionary compensation tied to their individual or business unit performance, or a combination thereof. The Company generally uses a netting approach, which nets losses against their individual or group revenues. As a result, management believes that employees and business units are appropriately motivated to seek the maximum revenue-enhancing opportunities, while managing the firm’s (and their individual or group’s) exposure to risk. The Board noted that an immaterial portion of the Company’s revenues are derived from proprietary trading businesses and that a significant portion of many employees’ compensation is provided in the form of equity linked compensation that vests over time, which has the effect of tying the individual employee’s long-term financial interest to the firm’s overall success. The Board believes that this helps mitigate the risks inherent in our business models.
The Board noted that our risk management team continuously monitors our various business groups, the level of risk they are taking and the efficacy of potential risk mitigation strategies. Senior management also monitors risk and the Board is provided with data relating to risk at each of its regularly scheduled meetings. The Chief Risk Officer meets with the Board at each of those meetings to present his views and to respond to questions.
Section 16(a) of the Securities Exchange Act of 1934, requires our directors and executive officers, and persons who beneficially own more than 10% of our outstanding Common Stock, to file with the SEC, by a specified date, initial reports of beneficial ownership and reports of changes in beneficial ownership of our Common Stock and other equity securities on Forms 3, 4 and 5. Directors, executive officers, and greater-than-10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. On February 27, 2009, Mr. Joyal filed an Annual StatementBased solely upon our review of Changes in Beneficial Ownershipfilings made pursuant to Section 16(a) during or related to fiscal 2011, we do not believe any of the persons mentioned above failed to file the required reports on Form 5 for fiscal year 2008 late reporting his acquisition of 297 shares in two transactions through a dividend reinvestment plan.
* * *
Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, or the Securities Exchange Act of 1934, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following Report Of The Compensation Committee and Report Of The Audit Committee shall not be incorporated by reference into any such filings.
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The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on our review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee of the Board of Directors, the members of which in 2008fiscal 2011 were Messrs. Campbell, Dooley, Joyal, Steinberg, Cumming and O’Kane, has furnished this report.
Richard G. Dooley, Chairman, W. Patrick Campbell, Robert E. Joyal
Joseph S. Steinberg, Ian M. Cumming and Michael T. O’Kane
* * *
The Audit Committee has reviewed and discussed the audited financial statements with management to ensure that the financial statements were prepared in accordance with generally accepted accounting principles and accurately reflect our financial position. The Audit Committee has discussed with our independent registered public accounting firm the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence,Statement on Auditing Standards No. 61, and has received written disclosures and a required letter from the independent registered public accounting firm regarding their independence. Based upon its discussions with management, review of the independent auditor’sregistered public accounting firm’s letter, discussions with the independent registered public accounting firm and other appropriate investigation, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report onForm 10-K. The Audit Committee has reviewed the non-audit fees described below and has concluded that the amount and nature of those fees is compatible with maintaining the independent registered public accounting firm’s independence.
The foregoing report has been furnished by:
W. Patrick Campbell, Chairman, Richard G. Dooley,
Robert E. Joyal
and Michael T. O’Kane
* * *
Deloitte & Touche LLP was our independent registered public accounting firm for 2011. The Audit Committee appointed KPMG LLP as independent auditorhas recommended the use of Deloitte again for fiscal 20092012 and presents this selection towe ask that you the shareholders ratify our selection of Deloitte & Touche again for ratification. KPMG will audit our consolidated financial statements for2012. For the fiscal 2009years ended November 30, 2011 and perform other permissible, pre-approved services. We paid KPMG the following2010, fees for services rendered during 2007provided by Deloitte & Touche LLP and 2008:
| 2007 | 2008 | |||||||
| Audit Fees | $ | 4,903,901 | $ | 5,218,704 | ||||
| Audit-Related Fees | $ | 1,194,114 | $ | 752,950 | ||||
| Tax Fees | $ | 497,188 | $ | 678,991 | ||||
| All Other Fees | $ | 333,706 | $ | 30,125 | ||||
| Total All Fees | $ | 6,928,909 | $ | 6,680,770 | ||||
| 2010 | 2011 | |||||||
Audit Fees | $ | 4,943,620 | $ | 6,665,000 | ||||
Audit-Related Fees | $ | 937,425 | $ | 1,052,600 | ||||
Tax Fees | $ | 542,140 | $ | 592,000 | ||||
All other Fees | $ | 0 | $ | 0 | ||||
Total All Fees | $ | 6,423,185 | $ | 8,309,600 | ||||
Audit Fees — Fees—The Audit Fees reported above reflect what KPMG has billed usfees for services provided during 2007fiscal 2010 and 2008.2011. These amounts include fees for professional services rendered as our principal accountant for the audit of our consolidated financial statements included in the auditCompany’s Annual Report on Form 10-K, the audits of various
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affiliates and investment funds managed by Jefferies or its affiliates, the audit of internal controls over financial reporting required by Section 404 of Sarbanes-Oxley, reviews of the interim consolidated financial statements included in our quarterly reports on Form 10-Q, the issuance of comfort letters, consents and other services related to SEC and other regulatory filings, audit fees related to the acquisition of Bache Securities and its affiliates from Prudential and for other services that are normally provided in connection with statutory and regulatory filings or engagements. The
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Audit-Related Fees — Fees—The Audit-Related Fees reported above reflect what KPMG has billed usfees for services provided during 2007fiscal 2010 and 2008.2011. These amounts include fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” above. Specifically, the Audit-Related services included quarterly reviews,the audit of our pension plan, preparation of our SAS 70 report, performing agreed upon procedures related to specific matters at our request, the issuance of independent auditor consent, the audits of our employee benefit plans, assessment and testing of internal controls and risk management processes beyond the level required as part of the consolidated audit, accounting consultations, and other services that are normally provided in connection with statutory and regulatory filings or engagements. Through service agreements, management arrangements or other reimbursement policies, certain unconsolidated funds or other entities have reimbursed us for an aggregate of $68,000 of the audit-related fees described above. Specifically, the reimbursed services involved the audits of our employee benefit plans.
Tax Fees — Fees—Tax Fees includes fees for services provided during fiscal 2010 and 2011 related to tax compliance, tax advice and tax planning.
All Other Fees — All Other Fees includes billing during 2007 and 2008Fees—There were no fees in this category for other services that did not fall within the above categories.
Form 10-K.
Regular Margin Accounts
We continue to operate our high yield secondary market business through Jefferies High Yield Trading, LLC (“Jefferies High Yield Trading”). We and a subsidiary of Leucadia National Corporation (“Leucadia”) each own 50% of the voting securities of Jefferies High Yield Holdings, LLC (“Holdings”), which owns Jefferies High Yield Trading. We and Leucadia each have the right to nominate two of a total of four directors to Holding’s boardBoard of directors. Leucadia’s nominees to our board of directors, Messrs. Cumming and Steinberg are the two of the directors of Holdings.Holdings nominated by Leucadia. Leucadia has invested $350,000,000 in Holdings and is currently committed to an additional investment of $250,000,000, subject to our prior request. Any request to Leucadia for additional capital investment in JHYH will require the unanimous consent of our board of directors (including the consent of Leucadia’s designees to our board of directors).
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Private Equity Funds
We have also invested in twothree private equity funds managed by companies controlled by Mr. Friedman, one of our directors, Chairman of the Executive Committee and a nominee, and have acquired interests in the profit participation earned by two of those management companies and another company that manages a third private equity fund and is controlled by Mr. Friedman.manage these three funds. These threetwo management companies (the “Fund Managers”) serve as the managers of the three private equity funds (the “Private Equity Funds”) and have varying profit participations and other interests in those funds. Mr. Friedman founded the
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business of the Fund Managers before he became associated with us. As of December 31, 2008,2011, we had committed an aggregate of approximately $62.3$146.8 million to twothree of these funds, and had funded approximately $36.2$83.1 million of these commitments. We have also guaranteed a $36 million bank loan issued to a Jefferies employee fund related to one of those funds. As a result of those investments, commitments and profit participations, for the period from January 1 through December 31, 2008,in 2011 we received distributions from the Private Equity Funds and the Fund IV manager of approximately $2.9$2.3 million and profit participations from the Fund Managers in the amount of $5.5$2 million. Included in the $1.225$1.24 billion in total equity committed to funds over which Mr. Friedman has control are individual investments of certain of our named executive officers. As a result of their individual cash commitments, as of December 31, 2008,2011, Mr. Handler, had an aggregate interest of .12% in the total committed capital in such funds of 0.1% and Mr. Friedman had an aggregate interest of 2.34% in such total committed capital.4.5%. In addition, Mr. Friedman has a substantial economic interest in the Fund Managers and, directly and indirectly, in the carried interest paid by the Private Equity Funds.
On August 11, 2008,September 30, 2010, we entered intobecame the lender to Jefferies Employee Partners IV LLC, one of the Private Equity Funds managed by companies controlled by Mr. Friedman, under a Credit Agreement assumed from Bank of America (the “Credit“JEP Credit Facility”) with JCP Fund V Bridge Partners, LLC, a Delaware limited liability company (the “Borrower”), pursuant to which we may make loans to the Borrower in. The JEP Credit Facility has an aggregate principal amountcommitment of up to $50.0$54 million at any time until August 10, 2009. The Borrower is owned by its two managing members which are James L. Luikart, executive vice president of Jefferies Capital Partners, and Mr. Friedman. The loans may be used by the Borrower to make investments that are expected to be sold to Jefferies Capital Partners V, L.P. (“Fund V”) upon its capitalization by third party investors. Fund V will be managed by a team led by Messrs. Luikart and Friedman. We anticipate as provided in the July 2005 agreement, provided that the preconditions are met, we will commit to directly or indirectly invest or guarantee the investment of up to $140 million in Fund V and its related parallel funds.
Through our subsidiaries, we have performed investment banking and other services for companies in which the Private Equity Funds have invested. In some cases, the Private Equity Funds control those companies in which they have invested. From January 1 through December 31, 2008,In fiscal 2011, we received $2.2$5.5 million in fee income for
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We employ and provide office space for all the Fund Managers’ employees under an arrangement we entered into with Mr. Friedman and Jefferies Capital Partners in 2005 and previously under an agreement entered into in 2001. Jefferies Capital Partners reimburses us on an annual basis for our direct employee costs, office space costs and other direct costs. In 2008,2011, we billed and received approximately $7.4$6.6 million in cash for such expenses.
Leucadia National Corporation
Leucadia National Corporation (“Leucadia”). On April 21, has been our largest shareholder since 2008 and as more fully set forth in the Agreements, which are attached to our Current Report onForm 8-K filed on April 21, 2008, we purchased from Leucadia 10,000,000 common shares of Leucadia in exchange for our issuance of 26,585,310 shares of our common stock, representing 16.7%January 1, 2012, held 29.4% of our outstanding shares (after giving effect to the Transaction), and a payment to Leucadia of $100,021,353 in cash. We reported in our Current Report onForm 8-K filed on June 9,shares. In 2008, that we had completed our sale of the 10,000,000 shares of Leucadia for aggregate proceeds of $535.2 million.
On February 25, 2011, we entered into two Stock Purchase Agreements, one with Mr. Cumming and one with Mr. Steinberg. Pursuant to the agreements, we purchased 261,599 Leucadia common shares from each of Mr. Cumming and Mr. Steinberg, for which each received the purchase price of $8,433,952, or $32.24 per share. The closing price for Leucadia common shares on May 19, 2008.the date of the transaction was $32.97 per share. Our Board reviewed the transaction in advance in accordance with our corporate governance policies and determined that the terms of the transaction were on terms no less favorable to us than we could have obtained in a comparable transaction with an unrelated person.
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On April 12, 2011, we entered into two Stock Purchase Agreements, one with a company controlled by Mr. Steinberg, and one with Mr. Cumming. Pursuant to the agreements, we purchased 324,030 Leucadia will continue to have the right to appoint two directors for two years so long as Leucadia maintains at least 15% beneficial ownership of our outstanding shares. Leucadia agreed thatcommon shares from each, for a periodtotal of two years, subject to certain exceptions (i) not to sell any648,060 Leucadia common shares for the purchase price of our$23,006,130, or $35.50 per share. The closing price for Leucadia common shares acquired inon the date of the transaction (ii) notwas $36.40 per share. Our Board reviewed the transaction in advance in accordance with our corporate governance policies and determined that the terms of the transaction were on terms no less favorable to acquire additional shares of our voting securities if such acquisition would resultus than we could have obtained in Leucadia beneficially owning more than 30% of our outstanding shares, and (iii) to vote itsa comparable transaction with an unrelated person.
On April 13, 2011, we sold 20,618,557 shares of our common stock to the public at a price of $24.25 per share. The shares were registered through a prospectus supplement dated April 8, 2011 to our shelf registration statement dated October 20, 2009. In connection with the offering, Leucadia purchased 5,154,639 shares at the same price the shares were made available to the public, resulting in favorgross proceeds from the sale of shares to Leucadia of $124,999,996. Our Board, other than Messrs. Cumming and Steinberg, reviewed the transaction in advance in accordance with our corporate governance policies and determined that it was in the best interest of the slateCompany to permit Leucadia to purchase up to $125 million in common shares and that the terms of directors nominatedthe transaction were on terms no less favorable to us than we could have obtained in a comparable transaction with an unrelated person.
On April 15, 2011, we entered into a Stock Purchase Agreement with a company controlled by Mr. Steinberg. Pursuant to the agreement, we purchased 250,000 Leucadia common shares for the purchase price of $8,750,000, or $35.00 per share. The closing price for Leucadia common shares on the date of the transaction was $35.81 per share. Our Board reviewed the transaction in advance in accordance with our boardcorporate governance policies and determined that the terms of directors.
During 2011, we purchased and sold common shares of Fortescue Metals Group Ltd., an Australian Stock Exchange listed company, in the ordinary course of our business. From time to time we purchased these shares from Leucadia and its affiliates. Mr. Cumming and Mr. Steinberg may be viewed as having an indirect financial interest in the transaction by virtue of their ownership of Leucadia shares and their positions as the Chairman of the Board and President of Leucadia. Mr. Cumming was a director of Fortescue until September 2011. In each case, we realized a profit on the disposition of the shares. In accordance with our corporate governance policies, the Board appointed Mr. Handler to review the purchases on behalf of the Board, and to approve the transactions provided that he determined that each transaction was on terms no less favorable to us than those that would have been obtained in a comparable transaction with an unrelated person. Mr. Handler made this determination with respect to each transaction, all of which are listed below
Trade Date | Shares | Seller | Total Purchase Price (US$) | Price per share (US$) | Closing Price (US$) | |||||||||||||
June 7, 2011 | 31,100,000 | LUK-Fortescue, LLC | $ | 207,126,000 | $ | 6.66 | $ | 6.68 | ||||||||||
June 14, 2011 | 61,300,000 | LUK-Fortescue, LLC | $ | 408,258,000 | $ | 6.66 | $ | 6.69 | ||||||||||
Dec 5, 2011 | 25,000,000 | Leucadia National Corp. | $ | 123,750,000 | $ | 4.95 | $ | 4.98 | ||||||||||
Jan 25, 2012 | 65,000,000 | LUK-Fortescue, LLC | $ | 334,100,000 | $ | 5.14 | $ | 5.15 | ||||||||||
Jan 25, 2012 | 35,000,000 | Leucadia National Corp. | $ | 179,900,000 | $ | 5.14 | $ | 5.15 | ||||||||||
Closing prices in the table above were based on the closing price on the Australian Stock Exchange on the trade dates, when converted to US dollars at then current exchange rates.
We also continue to performprovide various services on behalf ofto Leucadia in the ordinary course of our business. Through Jefferies High Yield Trading, we purchase and sell Leucadia’s debt securities from time to time in unsolicited transactions, selling to independent third parties through Rule 144. On February 27, 2009, Leucadia announced that its Board of Directors had authorized the company to make purchases, from time to time, of its outstanding indebtedness. Between February 27, 2009 and March 13, 2009, Leucadia purchased $26,935,000 aggregate principal amount of its debt securities from Jefferies High Yield Trading, some of which we had previously held in inventory and some of which we acquired from third parties in riskless principal transactions. In each case the trades were at prices negotiated by the parties relative to the current market price for the securities. We also acted as financial advisor to Leucadia in connection with the early conversion of some of its convertible debt securities. Through negotiations directly with existing convertible security holders, approximately $100 million aggregate principal amount of its convertible notes were early converted andDuring fiscal 2011, we received a financial advisory fee of $1.3 million for our services relating to the conversions. We have also received $2,069,077$14,537,522 in commissions and commission equivalents for conducting brokerage services on behalf of Leucadia affiliates.
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These transactions took place in the ordinary course of our business on substantially the same terms as those prevailing at the time for comparable transactions with persons not related to Jefferies and did not involve more than the normal market risk.
At February 15, 2012, we had commitments to purchase $262,943,743 in separate transactions, we purchased 650,000 common sharesagency commercial mortgage-backed securities from Berkadia Commercial Mortgage, LLC, 50% of Leucadia from a charitable trust created by Joseph S. Steinberg and from a corporationthe equity of which is indirectly owned by a trust for the benefit of Mr. Steinberg’s family and an aggregate of 650,000 common shares of Leucadia from Ian M. Cumming. We purchased the aggregate 1,300,000 common shares of Leucadia for $63,635,000, or $48.95 per share. The closing price of the Leucadia common stock on June 4, 2008 was $51.01. On June 9, 2008, Leucadia registered the resale of the shares. We realized a substantial loss on the resale of these securities over the next five and a half months. We have in the past entered into similar transactions in the ordinary course of our business with Messrs. Steinberg and Cumming in which we recognized gains, and we may enter into similar transactions in the ordinary course of our business in the future.
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We have employed Thomas E. Tarrant, thebrother-in-law of our Chief Executive Officer, as our Director of Marketing since 1997, three years before Mr. Handler was appointed as Chairman, CEO or President.CEO. For his services during 2008, hefiscal 2011, Mr. Tarrant was paid $324,997$292,583 in a combination of cash and restricted stock.
We have adopted a written Code of Ethics which is available both on our public website and on our corporate intranet. The Code of Ethics governs the behavior of all our employees, officers and directors, including our named executive officers. Our Code of Ethics provides that no employee shall engage in any transaction involving the Company if the employee or a member of his or her immediate family has a substantial interest in the transaction or can benefit directly or indirectly from the transaction (other than through the employee’s normal compensation), unless the transaction or potential benefit and the interest have been disclosed to and approved by the Company.
If one of our executive officers has the opportunity to invest or otherwise participate in such a transaction, our policy requires that the executive prepare a memorandum describing the proposed transaction. The memo must be submitted to the Global Head of Compliance or the General Counsel or his designee, and a copy of the memorandum will be provided to the Chairman of the Corporate Governance and Nominating Committee of the Board of Directors, or any other member designated by the Committee, for consideration and action by that committee. After consideration of the matter, the Corporate Governance and Nominating Committee will provide written notice to the executive of the action taken.
Our Code of Ethics has been adopted by the Board of Directors and any exceptions to the policies set forth therein must be requested in writing addressed to the Corporate Governance and Nominating Committee of the Board of Directors. If an executive officer requests an exception, the request must be delivered to the General Counsel and no exceptions shall be effective unless approved by the Corporate Governance and Nominating Committee.
Shareholder proposals for inclusion in the proxy material relating to our 20102013 Annual Meeting of Shareholders should be sent to our principal executive offices at 520 Madison Avenue, New York, New York, 10022, Attention: Lloyd H. Feller.Michael J. Sharp. To be considered timely under federal securities laws, any proposals must be received no later than December 8, 2009,November 28, 2012, to be included in next year’s proxy statement and proxy card, and no later than March 19, 2010,8, 2013, if to be presented at the meeting but not included in the proxy statement or proxy card. Though we will consider all proposals, we are not required to include any shareholder proposal in our proxy materials relating to next year’s annual meeting unless it meets all of the requirements for inclusion established by the SEC and our By-Laws.
For the Board of Directors, |
Michael J. Sharp,Secretary |
March 28, 2012
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Fellow Shareholder:
You are cordially invited to attend the BoardAnnual Meeting of Directors,
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Sincerely, | ||
Richard B. Handler | Brian P. Friedman | |
Chairman and CEO | Chairman of the Executive Committee | |
1 ¢
PROXY
JEFFERIES GROUP, INC.
Proxy for the Annual Meeting of Shareholders May 7, 2012
Solicited on Behalf of the Board of Directors of the Company
The undersigned holder(s) of common shares of JEFFERIES GROUP, INC., a Delaware corporation (the “Company”), hereby appoints Richard B. Handler and Brian P. Friedman, and each of them, attorneys of the undersigned, with power of substitution, to vote all shares of the common shares that the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held on Monday, May 7, 2012, at 9:30 a.m. local time, and at any adjournment thereof, as directed on the reverse hereof, hereby revoking all prior proxies granted by the undersigned.
(Continued and to be signed on the reverse side)
| COMMENTS: | |||||
| ¢ | 14475 ¢ |
ANNUAL MEETING OF SHAREHOLDERS OF
JEFFERIES GROUP, INC.
May 7, 2012
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of meeting,Meeting, proxy statement and proxy card
are available at www.jefferies.com/proxy
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
êi Please detach along perforated line and mail in the envelope providedIF you are not voting via telephone or the Internet.provided. êi
¢ 20830000000000000000 4 | ||||
050712 |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” THE RATIFICATION OF THE AUDITORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
1. | Election of Directors. | |||||||
| NOMINEES: | ||||||||||||||
¨FOR ALL NOMINEES |
| |||||||||||||
| WITHHOLD AUTHORITY FOR ALL NOMINEES |
| |||||||||||||
| FOR ALL EXCEPT (See instructions below) | ¡ ¡ ¡ | W. Patrick Campbell ¡ Ian M. Cumming ¡ Richard G. Dooley ¡Robert E. Joyal ¡Michael T. O’Kane ¡Joseph S. Steinberg | ||||||||||||
INSTRUCTIONS: | |||||||||
To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT”and fill in the circle next to each nominee you wish to withhold, as shown here:l | |||||||||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | ¨ | ||||||||
| FOR | AGAINST | ABSTAIN | |||||||||||||||
2. | Ratify the appointment of | ||||||||||||||||
3. | In their discretion, upon such other business as may properly come before the meeting, or at any adjournment thereof. | ||||||||||||||||
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD.
Signature of Shareholder | Date: | Signature of Shareholder | Date: | |||||||||||
| Note: |
| Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
¢ | ¢ |
ANNUAL MEETING OF SHAREHOLDERS OF
JEFFERIES GROUP, INC.
May 7, 2012
| PROXY VOTING INSTRUCTIONS |
INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page, and use the Company Number and Account Number shown on your proxy card.
TELEPHONE - Call toll-free1-800-PROXIES(1-800-776-9437) in the United States or1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card.
Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON - You are cordially invited to attend the Annual Meeting of Shareholders of Jefferies Group, Inc. The meeting will be held at our offices at 520 Madison Avenue, 10th Floor, New York, New York 10022, on Monday, May 18, 2009, at 9:30 a.m.
COMPANY NUMBER | ||
ACCOUNT NUMBER | ||
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:The Notice of meeting, proxy statement and proxycard are available at www.jefferies.com/proxy |
¢ 20830000000000000000 4 | ||||
050712 |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” THE RATIFICATION OF THE AUDITORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
1. | Election of Directors. | |||||
| NOMINEES: | ||||||||||||
¨ FOR ALL NOMINEES ¨WITHHOLD AUTHORITY FOR ALL NOMINEES ¨FOR ALL EXCEPT (See instructions below) | ¡ Richard B. Handler ¡ Brian P. Friedman ¡ W. Patrick Campbell ¡ Ian M. Cumming ¡ Richard G. Dooley ¡ Robert E. Joyal ¡ Michael T. O’Kane ¡ Joseph S. Steinberg | |||||||||||
INSTRUCTIONS: |
| |||||||
| To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT”and fill in the circle next to each nominee you wish to withhold, as shown here:l | ||||
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | ¨ | |||
| FOR | AGAINST | ABSTAIN | |||||||||||||||
2. | Ratify the appointment of | ||||||||||||||||
3. | In their discretion, upon such other business as may properly come before the meeting, or at any adjournment thereof. | ||||||||||||||||
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD.
Signature of Shareholder | Date: | Signature of Shareholder | Date: | |||||||||||
| Note: |
| Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
¢ | ¢ |