The following table sets forth certain information with respect to each person who currently serves as one of our executive officers, and includes George G. Ellison, our Chief Executive Officer who also serves as Chairman of the Board.officers. Our executive officers are appointed annually by our Board of Directors and generally serve at the discretion of our Board of Directors.Board. There are no arrangements or understandings between us and any person for election as our executive officer. None of our Directorsdirectors and/or executive officers is related to any other Directordirector and/or executive officer of AAMC or any of its subsidiaries by blood, marriage or adoption.
Thomas McCarthy | | | 66 | |
Name (1) | | Age | | Position |
George G. Ellison | | 60 | | Interim Chief Executive Officer and Chairman |
Robin N. LoweStephen Krallman | | 54 | 56 | | | Chief Financial Officer |
Stephen H. GrayKevin Sullivan | | 49 | 49 | | | General Counsel and Secretary |
Rene Dittrich | | 47 | | Chief AccountingCompliance Officer |
___________
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(1)
| All information set forth herein is as of April 29, 2019.October 4, 2021. |
The principal occupation for at least the last five (5) years, as well as certain other biographical information, for each of our executive officers is set forth below.
Thomas McCarthy. Mr. Ellison’s background is providedMcCarthy has served as our Interim Chief Executive Officer since April 2021. Prior to that time, Mr. McCarthy served as an advisor to various businesses, including a national risk management / private investigation firm and a provider of real estate services to the mortgage industry (acting as part-time CFO for the latter). He brokered real estate and financing transactions as well during the last 5 years. His experience also includes time as a Senior Vice President for National General Lender Services and while at Altisource Portfolio Solutions, Inc. (NASDAQ: ASPS) he ran business development and reported to the CEO. Mr. McCarthy was also a Managing Director at Carlton Advisory Services, Inc., a real estate investment bank, for 8 years where he reported to the Chairman and was Co-Head of their Loan Sale Advisory Practice. During his career, Mr. McCarthy has run a number of successful businesses and profit centers including business units at Ocwen Financial Corporation (where he spent over 11 years and as a Senior Vice President reported to the President). Mr. McCarthy was also employed by PepsiCo Inc. for 4 years, the last two as the Controller of a subsidiary. Mr. McCarthy has an MBA in the section of this proxy statement entitled “Election of Directors” above.Finance and Accounting from Columbia University and a BA in Economics from Whitman College.
Stephen Krallman.Robin N. Lowe. Mr. LoweKrallman has served as our Chief Financial Officer since October 2014June 2021. Mr. Krallman was the Vice President, Corporate Controller, for Diamond Resorts International (“DRI”), an international hospitality and has also served asvacation ownership company with over $4.0 billion in assets. Mr. Krallman was responsible for the Chief Financial Officeraccounting, reporting, and internal control functions at DRI and supervised a staff of Front Yard since October 2014. He oversees all of our financial affairs including financial reporting, treasury, tax and shareholder relations.over 50 personnel. Prior to joining DRI in 2015, MR. Krallman had over 20 years of experience in the real estate, financial services, and manufacturing industries where his appointment,positions and responsibilities included SEC reporting for initial public offerings, SEC annual and quarterly reporting, business combination and acquisitions, and system integrations. Mr. Lowe served as Chief Financial Officer of CitiMortgage Inc. from October 2012 to July 2014. From May 2010 to September 2012, Mr. Lowe served as Chief Financial Officer of Citibank Korea, and from October 2008 to April 2010, he served as Chief Financial Officer of Citibank’s South East Asia Pacific region. From May 1995 to September 2008, Mr. Lowe served in lead finance roles with Citibank in various countries and regions. Mr. Lowe is a Fellow of the Institute of Chartered Accountants in England and Wales of which he has been a member since 1992. He holds a Masters Degree in Classics andKrallman hold a Bachelor of Arts, with honors,Business Administration in Accounting from Oxford University.the University of San Diego.
Stephen H. Gray.Kevin Sullivan. Mr. GraySullivan has served as our General Counsel and SecretaryChief Compliance Officer since November 2012 and has also served as the Chief Administrative Officer of Front Yard since January 2016. Mr. Gray also served as the General Counsel and Secretary of Front Yard from December 2012 to January 2016.September 2021. Prior to joining AAMC,the Company, Mr. Gray was GeneralSullivan served as Vice President and Senior Counsel for Goldman Sachs & Co. LLC (“Goldman Sachs”) and Assistant Secretary of LaBrancheThe Goldman Sachs Group Inc., the parent company of Goldman Sachs. During his more than 15 years at Goldman Sachs, Mr. Sullivan was responsible for advising Goldman Sachs in a multitude of areas, including financial reporting, disclosure and internal controls, corporate treasury, securities offerings, investor and media relations and investment banking. Prior to joining Goldman Sachs, Mr. Sullivan was an associate at Skadden, Arps, Slate, Meagher & Co Inc., a publicly traded financial services companyFlom LLP in New York New York, from May 2004 to December 2011,working in the corporate finance and was a consulting attorney for The Nielsen Company, a global information and measurement company, during 2012. From June 1998 to May 2004, Mr. Gray was a corporate and securities attorney at the law firm of Fulbright & Jaworski L.L.P. in New York, New York, specializing in, among other things, securities offerings, mergers and acquisitions and general corporate reporting for public and private companies. From January 1996 to June 1998, he was a corporate and securities attorney at the law firm of Brock, Silverstein & McAuliffe, LLC, in New York, New York. Hepractice areas. Mr. Sullivan holds a BachelorJ.D. from the University of Arts in History from Hobart CollegeVirginia School of Law and a Juris DoctorateB.A. from Widener University School of Law.Amherst College.
Rene Dittrich.Mr. Dittrich has served as our Chief Accounting Officer and has also served as Chief Accounting Officer of Front Yard since May 10, 2017. Prior to joining AAMC, Mr. Dittrich held several positions at Credit Suisse in Zurich, Switzerland, New York, NY and Raleigh, NC over a 19-year career. Most recently, from 2011 through April 2017, Mr. Dittrich led the U.S. accounting function for Credit Suisse and also acted as the Site Lead for the finance group in Credit Suisse’s North Carolina Corporate Center. In this role, Mr. Dittrich focused on financial reporting, regulatory reporting, accounting policy and tax. Prior to 2011, Mr. Dittrich also served as, among other things, Chief Operating Officer for the Regional Controller with oversight for Credit Suisse’s locations in Brazil, Mexico, the Bahamas and Canada and as Vice President of Budgeting and Strategic Planning. Mr. Dittrich is a licensed CPA and has a Bachelor’s degree and a Master’s degree in Business from Zurich University, Switzerland.
Compensation Discussion & Analysis
We believe an effective executive compensation program aligns executives’ interests with stockholders by rewarding performance that achieves or exceeds specific financial targets and strategic goals designed to increase stockholder value, including, without limitation, goals set for our primary client and primary source of revenues, Front Yard Residential Corporation (“Front Yard”). We seek to promote individual service longevity and to provide our executives with long-term incentive opportunities that promote consistent, high-level financial performance. The Compensation Committee evaluates both performance and compensation annually to ensure that we maintain our ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of peer companies, subject to consideration of the Company’s own financial performance. To achieve these objectives, we generally believe executive compensation packages should include both cash and equity-based compensation that rewards performance as measured against established goals.
This compensation discussion and analysis provides information regarding the following:
compensation programs for our Chief Executive Officer, Chief Financial Officer, General Counsel and Secretary and Chief Accounting Officer;
overall objectives of our compensation program and what it is designed to reward;
each element of compensation that we provide; and
the reasons for the compensation decisions we have made regarding these individuals.
Our named executive officers for 2018 were:
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Name | | Position |
George G. Ellison | | Chief Executive Officer |
Robin N. Lowe | | Chief Financial Officer |
Stephen H. Gray | | General Counsel and Secretary |
Rene Dittrich | | Chief Accounting Officer |
Role of Executive Officers in Compensation Decisions
The Chief Executive Officer is involved in the design and implementation of our executive compensation, including equity compensation under our 2012 Equity Incentive Plan, and is typically present at Compensation Committee meetings, except that the Chief Executive Officer is not present during any voting or deliberations on his compensation. The Chief Executive Officer annually will review the performance of each executive officer (other than himself, whose performance is reviewed by the Compensation Committee) and present his conclusions and recommendations regarding incentive award amounts (both cash and stock, as applicable) to the Compensation Committee for its consideration and approval. The Compensation Committee can exercise its discretion in accepting, rejecting and/or modifying any such executive compensation recommendations; however, executive compensation matters are generally delegated to the Chief Executive Officer (other than with respect to himself) for development and execution. In connection with our 2018 year-end cash incentive compensation, Mr. Ellison was involved with, and recommended compensation for, our named executive officers other than him, based in part on discussions with F.W. Cook & Co. (“F.W. Cook”), who has, in prior years, been retained as the Compensation Committee’s consultant.
Compensation Consultant
To further the objectives of our compensation program, our Compensation Committee may conduct an analysis of the compensation levels of certain of our named executive officers in conjunction with an independent compensation consultant. For year-end 2018 incentive compensation, although the Compensation Committee did not retain F.W. Cook as its consultant in connection with its compensation decisions, both our Chief Executive Officer and the Compensation Committee had discussions to confirm 2018 industry data with respect to the Company’s peers. Combined with the prior determination, based on AAMC’s financial performance, that it would not increase the incentive compensation of our named executive officers, the Compensation Committee confirmed that the compensatory and competitive environment had not materially changed in 2018 compared to the environment that
existed in 2017 when the Compensation Committee had retained F.W. Cook. Using the analysis that had been provided by F.W. Cook in connection with 2017 year-end compensation decisions, the Compensation Committee relied upon the benchmarking performed by F. W. Cook against peer companies of Front Yard and analysis of the peer compensation of internally managed and externally managed companies with whom Front Yard competes and from whom AAMC would retain and/or potentially lose talent. This decision was reached by the Compensation Committee considering that (a) F.W. Cook advised the Compensation Committee that the overall compensation structure of such peer companies has not materially changed, (b) the compensation paid to AAMC’s named executive officers was generally lower than the median compensation of named executive officers at such companies and (c) given AAMC’s financial performance in 2018, the Compensation Committee desired to keep the named executive officer compensation flat or lower than their 2017 compensation. The peer/industry companies considered by F.W. Cook in providing its advice to the Compensation Committee in 2017 and which the Committee determined remained appropriate for 2018 decisions, included American Assets Trust, American Homes 4 Rent, BRT Apartments, Dynex Capital, EdR, Hannon Armstrong, Investors Real Estate Trust, Invitation Homes, Independence Realty, iStar, Ladder Capital, RAIT Financial Trust, Redwood Trust, STORE Capital, UMH Properties and Washington REIT.
In 2018, the Compensation Committee also considered our current senior executive relocation packages and related benefits to the benefits provided to senior executives of other off-shore companies, which were aligned with industry practices, particularly given the challenges the Company can have in recruiting talent in the U.S. Virgin Islands and the Cayman Islands. Due to the recent 2017 review, the Compensation Committee determined not to obtain a new analysis of the relocation benefits for 2018 year-end compensation decisions. See “–Employee Relocation Program” below for more information.
If the Compensation Committee hires a compensation consultant, including F.W. Cook, for future periods, the consultant would be expected to provide research and present information to the Compensation Committee related to compensation trends and “best practices” in executive compensation among peer group companies in a similar line of business and of similar size to AAMC, or its primary client Front Yard, or any of AAMC’s other potential advisory clients. Executive compensation data and other resources provided by the compensation consultant would be expected to set the foundation for the Compensation Committee’s review and analysis of executive compensation levels.
Employment Agreements
We currently do not have employment agreements with any of our named executive officers. However, our employment arrangements provided for a base salary and cash incentive compensation based on the overall performance of the executive and their importance to the Company as well as satisfaction of pre-established Front Yard and AAMC-specific performance criteria. The named executive officers may also receive grants of restricted stock awards under our 2012 Equity Incentive Plan at the discretion of the Compensation Committee, as the 2102 Equity Incentive Plan administrator. In addition, the executives may receive benefits such as participation in our health care plan and opportunity to participate in a contributory retirement plan. AAMC reimburses each executive for reasonable costs properly incurred by such executive in the course of his or her employment with us including, without limitation, reimbursement of relocation expenses, if relocation is required, and the provision of certain allowances as described in the Executive Compensation section below.
In addition, in the event that the executive’s employment is terminated by us without “cause” the executive may receive severance benefits of up to six months’ base salary. “Cause” generally is defined as either (i) any willful or grossly negligent conduct (including, but not limited to, fraud or embezzlement) committed by the executive in connection with his/her employment, which conduct in the reasonable determination of the Board of Directors has had or will have a material detrimental effect on our business, or (ii) the executive’s conviction of, or entering into a plea of nolo contendere to, a felony involving fraud or embezzlement or such other crime that may bring disrepute upon us, whether or not committed in the course of his or her employment. In these instances, we would also pay standard relocation costs to relocate the executive to their previous domicile prior to being relocated to the U.S. Virgin Islands or the Cayman Islands, as applicable.
Each of our executives has executed an Employee Intellectual Property and Confidentiality Agreement that contains covenants to maintain our confidential information and that all developments by such executive shall be our property.
Elements of Compensation
The current compensation package for our named executive officers consists of base salary and annual cash incentive compensation. This compensation structure was developed in order to provide each named executive officer with a competitive salary while emphasizing a cash incentive compensation element that is tied to the achievement of corporate goals and strategic initiatives as well as individual performance. The Compensation Committee also may, from time to time, grant equity compensation awards to the named executive officers in order to further align their interests with AAMC’s stockholders. We believe that the following elements of compensation are appropriate in light of our strategic initiatives, industry, current challenges and environment.
Base Salary. Base salaries for our named executive officers are established based on individual qualifications and job responsibilities while taking into account compensation levels at similarly situated companiesfor similar positions.
Base salaries of the named executive officers are expected to be reviewed annually during the performance appraisal process with adjustments made based on market information, internal review of the executive officer’s compensation in relation to other officers, the individual performance of the executive officer and our corporate performance. Salary levels are also considered upon a promotion or other change in job responsibility. Salary adjustment recommendations will be based on our overall performance and an analysis of compensation levels necessary to maintain and attract quality personnel. The Compensation Committee will set the base salary for the Chief Executive Officer and approve the base salaries for all other named executive officers.
Annual Cash Incentive Compensation. Pursuant to our annual incentive philosophy, our executives can earn cash awards as determined by the Compensation Committee. Our philosophy provides the Compensation Committee and our management with the authority to establish incentive award guidelines, which are further discussed below.
Equity Awards under the 2012 Equity Incentive Plan. The Company adopted the 2012 Equity Incentive Plan to afford an incentive to officers, non-employee directors, employees, advisors and consultants of the Company and its affiliates to continue as officers, non-employee directors, employees, advisors or consultants, to increase their efforts on behalf of AAMC and to promote the success of AAMC’s business. From time to time, the Compensation Committee, as administrator of the 2012 Equity Incentive Plan, grants awards to our named executive officers in addition to their annual cash incentive compensation. For further information on our 2012 Equity Incentive Plan, please see “–2012 Equity Incentive Plan” below.
2018 Compensation Determinations
Under AAMC’s annual cash incentive compensation plan, our named executive officers can earn cash incentive compensation awards as determined by the Compensation Committee. The Compensation Committee and management have the authority to establish incentive compensation award guidelines. Each named executive officer has a targeted annual cash incentive award that is expressed as a percentage of his or her annual cash total target compensation. In 2018, 34-50% of total annual cash target compensation was payable to our named executive officers only upon achievement of certain scorecard and individual performance levels. The appropriate targeted percentage varies based upon the nature and scope of each named executive officer’s responsibilities.
Our annual incentive-based cash compensation is structured to motivate executives to achieve pre-established key performance indicators by rewarding the executives for such achievement. We seek to accomplish this by utilizing a balanced scorecard methodology that incorporates multiple financial and non-financial performance indicators developed through our annual strategic planning process. A corporate scorecard is approved by our Compensation Committee and/or the full Board of Directors and is utilized by the Compensation Committee as a factor to determine the appropriate amount of incentive compensation to be paid to our employees named executive officers.
For 2018, AAMC’s corporate scorecard remained substantially unchanged from the corporate scorecard approved by the Compensation Committee in 2017, with the exception of certain performance goals that were adjusted to reflect updated 2018 strategic objectives following the goals that had been achieved in 2017, based in substantial part on the corporate goals that were most important to AAMC and to Front Yard as AAMC’s primary client. The Compensation Committee determined that the Front Yard goals were important to AAMC in light of the fact that the
achievement of such Front Yard’s goals would enable Front Yard to meet performance targets that could translate into higher asset management revenues for AAMC.
The corporate scorecard for 2018 for matters related to both AAMC’s and Front Yard’s performance is detailed below:
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Goal/Strategic Initiative | | Metric | | Performance Goals | | Performance Goal Achievement |
1. | Maintain Front Yard’s financing arrangements/ ensure adequate liquidity
| | Financing facilities and available liquidity for Front Yard are sufficient to support business objectives
| | Push out maturities of financing; fix interest rates where appropriate/ beneficial; increase and/or stabilize funding capacity
| | Front Yard’s weighted average debt maturity increased to 5.5 years at December 31, 2018 compared to 3.5 years at December 31, 2017; 87% of debt had fixed or capped rates at December 31, 2018 compared to 64% at December 31, 2017. New 10 year Freddie Mac $509 million term loan with 4.65% fixed rate. Refinanced prior $489 million loan into a $505 million loan using same collateral with Morgan Stanley at 148.5bps lower credit spread.
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2. | Increase rental homes under management for Front Yard at appropriate yields
| | Increase number of homes in Front Yard’s rental portfolio. Maximize the number of purchased/rented homes based on market opportunities
| | Meaningfully increase the size of Front Yard’s rental portfolio through purchase of rental homes at appropriate yields
| | Stabilized rental portfolio of 14,383 homes at December 31, 2018, up 23% over December 31, 2017. Increased rental revenue by 48% over the full year 2017 to $183.0 million for the year ended December 31, 2018.
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3. | Improve Front Yard’s stabilized rental home operating metrics
| | Continue to improve Front Yard’s operating metrics to be in line with or exceed single-family rental competitors
| | Achieve or exceed industry standard operating metrics for Stabilized Rental Net Operating Income (“Stabilized Rental NOI”) and Stabilized Rental NOI Margin
| | Achieved and improved target Stabilized Rental Net Operating Income and Stabilized Rental NOI Margin before acquisition of HavenBrook Partners, LLC. Maintained strong stabilized rental operating metrics during transition of property management to internal platform in second half of 2018.
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4. | Maintain appropriate capital markets flow
| | Continue to complete sales of non-rental assets to recycle liquidity and improve Front Yard’s purchasing power; complete and/or collapse securitizations as appropriate
| | Continue sales of remaining non-rental real-estate owned (“REO”) properties to dispose of legacy assets and generate liquidity for purchases of stabilized single-family rental properties
| | Sold 386 legacy REO properties, reducing the portfolio of legacy REO properties by 79% to 104 at December 31, 2018 from 490 at December 31, 2017.
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Goal/Strategic Initiative | | Metric | | Performance Goals | | Performance Goal Achievement |
5. | Diversification of AAMC’s business
| | Seek to amend the AMA between AAMC and Front Yard. Create new business lines and revenue streams for AAMC
| | Consider and, if appropriate, amend AAMC/Front Yard Asset Management Agreement to better align interests, improve Front Yard G&A, improve fee structure and retain AAMC. Potential funding and/or development of SFR properties for Front Yard or other buyers.
| | Continuing to negotiate and consider changes to the Asset Management Agreement; revenue streams relating to building flow program is continuing development. Development delayed due to completion of transformational acquisition of property manager for Front Yard.
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6. | Hire and develop key talent
| | Focus on increasing talent pool for AAMC/hire key personnel
| | Hire and develop key talent
| | VP of Treasury hired, Senior Transactional Attorney hired for Front Yard acquisitions and compliance initiatives, VP of Information Technology hired to further develop portfolio management tools for AAMC clients and build AAMC network infrastructure.
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7. | Regulatory compliance and litigation management
| | Maintain AAMC compliance with Virgin Islands Economic Development (“EDC”) program, maintain compliance as a registered investment adviser (“RIA”) and reduce or remove litigation exposure for AAMC
| | Maintain compliance with regulatory requirements and manage litigation exposure
| | Achieved compliance with regulatory requirements of EDC and RIA rules/registration; won motions to dismiss in AAMC’s class securities litigation and caused voluntary dismissal of related AAMC stockholder derivative action with no liability to AAMC.
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8. | Individual performance - personal evaluation
| | Efforts to grow revenue and improve profitability, reduce costs, identify and prevent litigation, own and articulate vision, build corporate culture and morale, decision making, succession planning, diagnose problems and identify solutions, maintain effective processes
| | Per individual
| | To be determined by Compensation Committee with recommendation of CEO for all but himself |
The components above in each scorecard are weighted based on relevance to Front Yard’s and AAMC’s ultimate long-term performance and the achievement of their respective corporate strategies.
The scorecards are communicated to all incentive eligible executives by the executive's immediate supervisor, which in the case of all of our named executive officers other than Mr. Ellison is the Chief Executive Officer. This incentive compensation structure is intended to align the goals of our incentive eligible employees with the overall success of AAMC and Front Yard, as AAMC’s primary client, while establishing clear performance standards within their respective business or support units.
The 2018 personal scorecards for Mr. Ellison and each of Messrs. Lowe, Gray and Dittrich were based on the corporate scorecard goals set forth in the table above and an evaluation of their individual performance and
leadership as a whole. Each of the goals were weighed and applied by our Compensation Committee for each named executive officer in determining his performance against the goals on an overall basis, taking into consideration their individual performance and the industry compensation levels of the peers.
For our executives and key employees other than Mr. Ellison, Mr. Ellison presents performance appraisal scores to the Compensation Committee and makes recommendations as to their incentive compensation. Our Compensation Committee evaluates the recommendations in light of overall performance and such employee’s business unit or support unit’s performance and makes the final compensation award determinations. Annual cash incentive compensation is paid to our executives and other incentive eligible employees following this determination. Despite the positive performance of the named executive officers in respect of the scorecard above, our Compensation Committee determined to keep flat or reduce the cash compensation payable to our named executive officers the separate financial performance of AAMC in 2018, in light of the financial performance of AAMC compared to 2017 financial performance.
Following these procedures and the ratings of achievement against their 2018 scorecards, the Compensation Committee determined to award the following cash incentive compensation awards to our named executive officers: Mr. Ellison received an annual cash bonus of $300,000, or 66.7% of his aggregate target cash bonus opportunity; Mr. Lowe received an annual cash bonus of $350,000, or 87.5% of his aggregate target cash bonus opportunity; Mr. Gray received an annual cash bonus of $150,000, or 71.4% of his aggregate bonus opportunity; and Mr. Dittrich received an annual cash bonus of $120,000, or 85.7% of his aggregate target cash bonus opportunity. These annual cash bonuses were awarded in February 2019. Certain of our executive officers were also awarded equity-based awards in January 2019 as described more fully in “2012 Equity Incentive Plan” below. Please see the Summary Compensation Table under “Executive Compensation” for the actual amounts awarded to our named executive officers for 2018 performance.
In determining the bonuses for our named executive officers, the Compensation Committee considered the valuable and substantial contributions they had made to both AAMC and Front Yard in 2018, the importance to us of retaining and incentivizing them, and the historical 2017 F.W. Cook analysis in comparing our compensation structure to those of companies in the industry in which we and Front Yard compete, which overall is lower than the compensation paid to the similar named executive officers in the peer companies and the fact that AAMC’s actual performance for Front Yard and itself had not yet translated into improved financial performance for AAMC’s 2018 calendar year. The Compensation Committee also considered that, although the substantial accomplishments made by such officers were not reflected in AAMC’s GAAP financial performance, such accomplishments were key in setting up AAMC for future success under the Asset Management Agreement with Front Yard.
The base salary and annual cash incentive compensation paid to our named executive officers totaled $2,459,385 in the aggregate for 2018, or approximately 16.7% of the management fees of $14,742,991 paid by Front Yard to AAMC. Of the $2,459,385 paid to our named executive officers, 62.6% or $1,539,385 was paid as base salary and 37.4% or $920,000 was paid in the form of annual cash incentive compensation. None of these amounts are reimbursed or paid by Front Yard under the asset management agreement between Front Yard and AAMC, as they are solely designed to be covered by the base management fee paid to AAMC.
2019 Annual Incentive Compensation. Generally, in the meetings of the Board of Directors and Board Committees held in March or April of each fiscal year, the Compensation Committee approves the corporate scorecard and annual incentive components for the Chief Executive Officer and other named executive officers for the upcoming year. The Compensation Committee determined that the following strategic initiatives were important and would be considered in determining the 2019 cash incentive compensation for our named executive officers:
AAMC’s financial performance;
Potential amendment of the Asset Management Agreement between Front Yard and AAMC to better align interests, improve Front Yard G&A, improve fee structure and retain AAMC;
AAMC’s diversification of business and increased revenue stream;
Front Yard’s financial and operating performance;
achieving targeted growth of Front Yard’s rental portfolio;
capital markets and purchase transactions for Front Yard;
maintaining or increasing financing capability and liquidity for Front Yard; and
maintaining REIT compliance for Front Yard, and corporate governance and regulatory compliance for AAMC.
2012 Equity Incentive Plan
In December 2012, our prior Board of Directors and AAMC’s sole stockholder approved and implemented the 2012 Equity Incentive Plan. The purpose of the 2012 Equity Incentive Plan is to provide additional incentives to key employees, Directors and other key individuals to make extraordinary contributions to the Company, to assist with the retention of key employees, Directors and other key individuals and to align their interests with the interests of our stockholders. The 2012 Equity Incentive Plan is administered by the Compensation Committee, who authorizes the award of restricted stock, options, stock appreciation rights, stock purchase rights or other equity-based awards to our employees. Options awarded under the 2012 Equity Incentive Plan, if any, may be either “incentive stock options” as defined in Section 422 of the United States Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, as determined by the Compensation Committee. Currently, other than restricted stock awards with vesting terms, the Compensation Committee does not expect to grant any options, stock appreciation rights, stock purchase rights or other equity based awards under the 2012 Equity Incentive Plan.
Each restricted stock award granted under the 2012 Equity Incentive Plan is, and will be, evidenced by a written award agreement between the participant and us, which describes the award and states the terms and conditions to which the award is subject. If any shares subject to award are forfeited or if any award terminates, expires or lapses without being exercised, shares of common stock subject to such award will again be available for future award.
Our 2012 Equity Incentive Plan allows grants of both performance hurdle-vested stock awards and time-vested stock awards. Prior to 2017, our restricted shares of common stock vest subject to the achievement of stock performance hurdles of AAMC, generally related to the performance of AAMC stock price since the date of grant. Due to the relatively low public float and relative volatility of our common stock, in order to better incentivize award recipients, the Compensation Committee commenced granting time-vested restricted stock awards with vesting dates on each of the first three anniversaries of the date of grant.
For performance hurdle-vested awards, if an award recipient’s service with AAMC or any of its affiliates is terminated prior to full vesting of the restricted stock, then the award recipient will forfeit all unvested restricted stock to AAMC, except that (i) if an award recipient’s service is terminated either by us (or an affiliate) without cause or due to death or disability and (ii) if a performance hurdle has already been achieved or is achieved within ninety days of termination, unvested stock for the corresponding tranche will continue to vest; provided that the recipient was employed by AAMC or its affiliates for at least two years prior to termination. For the time-vested restricted stock awards, the awards will continue to vest in accordance with their vesting terms upon termination of their employment unless the recipient’s employment is terminated “for cause.”
2018 Equity Awards
On February 20, 2018, the Compensation Committee awarded Mr. Ellison an aggregate of 16,487 shares of AAMC restricted stock with a grant date fair value of $1,055,992, Mr. Lowe an aggregate of 3,903 shares of AAMC restricted stock with a grant date fair value of $249,987 and Mr. Gray an aggregate of 2,342 shares of AAMC restricted stock with a grant date fair value of $150,005. The grant date value of $64.05 per share was determined based on the average of the high and low sales prices on February 20, 2018. Each of these awards vest in three equal annual installments on each of February 20, 2019, 2020 and 2021. The award of these shares is included in the “Summary Compensation Table” in this proxy statement because the grants were made during the 2018 fiscal year. None of our other named executive officers received any additional awards of restricted stock.
In determining the awards for our named executive officers, the Compensation Committee considered the valuable and substantial contributions they had made to achieving Front Yard's and AAMC’s strategic objectives, the importance to us of retaining and incentivizing them and the desire to have their cash compensation reduced and converted into the restricted stock awards so that the benefits of such grants only would be realized if the Company’s stock price were to increase.
2019 Equity Awards
On January 23, 2019, the Compensation Committee awarded Mr. Ellison an aggregate of 39,355 shares of AAMC restricted stock with a grant date fair value of $1,049,991, Mr. Lowe an aggregate of 9,730 shares of AAMC restricted stock with a grant date fair value of $259,596 and Mr. Gray an aggregate of 5,622 shares of AAMC restricted stock with a grant date fair value of $149,995. The grant date value of $26.68 per share was determined based on the average of the high and low sales prices on January 23, 2019. Each of these awards shall vest in three equal annual installments on each of January 23, 2020, 2021 and 2022. The award of these shares is not included in the “Summary Compensation Table” because the grants were made following the end of the 2018 fiscal year. None of our other named executive officers received any additional awards of restricted stock.
Any future awards of restricted stock by us may be subject to vesting requirements determined from time to time by the Compensation Committee, which may be different from or similar to the vesting requirements set forth above.
Relocation Program and USVI Preferred Stock Plan
Our principal offices are based in St. Croix, in the U.S. Virgin Islands, and we also have an office in the Cayman Islands. Generally, the employees we seek to hire have previously not been based in St. Croix or the Cayman Islands. Rather, the talent we have recruited has generally been located in major metropolitan centers in the United States. In addition, St. Croix is generally more economically depressed and both the Cayman Islands and St. Croix have a higher cost of living compared to most of the major metropolitan areas of the United States where we believe important talent is located and a number of our peer companies are based.
Employee Relocation Program. In order to enable us to recruit top talent and incentivize key personnel to relocate, we offer a relocation package to individuals who are relocating to the U.S. Virgin Islands or the Cayman Islands to work (the “Employee Relocation Program”). The Employee Relocation Program includes relocation benefits such as moving expenses, home sale support, a housing allowance, payment of applicable children’s school tuition fees and payment of “home leave” travel for return trips to the continental United States, in each case subject to certain limits and exceptions. Upon a participant’s departure after at least one year of service or termination without cause, such participant is eligible to receive reimbursement for relocation costs back to the continental United States. We believe that our Employee Relocation Program is necessary to attract and retain talent that is critical to our success. For 2018, each of Messrs. Ellison, Lowe, Gray and Dittrich received benefits under the Employee Relocation Program as set forth in the “Summary Compensation Table” below and accompanying footnotes. In 2018, in reviewing our relocation program against other off-shore companies for 2017 compensation decisions, F.W. Cook had advised that our packages, although given to more executives than the comparable offshore entities, were generally lower in amount than the comparable offshore companies and, therefore were within approximately 5% of the median benefits provided at such comparable offshore companies. The Compensation Committee determined to rely on the 2018 report of F.W. Cook in determining not to materially change AAMC’s relocation plan.
Preferred Stock Plan. Following stockholder approval at the 2016 Annual Meeting of Stockholders, we implemented AAMC’s 2016 Employee Preferred Stock Plan (the “Preferred Stock Plan”). The Preferred Stock Plan authorizes the grant of restricted non-voting Preferred Stock to AAMC’s U.S. Virgin Islands employees. The Preferred Stock Plan was created to induce certain employees to relocate and work in the U.S. Virgin Islands, remain in the employ of AAMC and provide additional incentive to promote the success of AAMC. On January 5, 2017, our Board of Directors authorized the acquisition of 100 shares of Series B Preferred Stock by Mr. Ellison and 100 shares of Series C Preferred Stock by Mr. Gray, and on February 20, 2018, our Board of Directors authorized the acquisition of 100 shares of Series E Preferred Stock by Mr. Dittrich. In February 2018 and 2019, AAMC declared and paid dividends on the Preferred Stock held by Messrs. Ellison, Gray and Dittrich as well as other U.S. Virgin Islands employees of AAMC. Details regarding the dividends paid to Messrs. Ellison, Gray and Dittrich in each year are set forth in the footnotes to their “Other Compensation” column of the “Summary Compensation Table” below. Because Mr. Lowe is not located in the U.S. Virgin Islands, he does not participate in the Preferred Stock Plan.
Stock Ownership Policies
Although we do not have stock ownership requirements, our philosophy is that equity ownership by our Directors and executives is important to attract, motivate, retain and to align their interests with the interests of our stockholders. The Compensation Committee believes that our various equity incentive plans are adequate to achieve
this philosophy. We also maintain an insider trading policy detailing our trading window period for Directors, executive officers and other employees.
Other Compensation
The Compensation Committee’s policy with respect to other employee benefit plans is to provide benefits to our employees, including executive officers, that are comparable to benefits offered by companies of a similar size to ours. A competitive comprehensive benefit program is essential to achieving the goal of attracting and retaining highly qualified employees.
Potential Payments upon Termination or Change in Control
Below is a description of the amounts payable to each currently employed named executive officer, assuming the executive’s employment had terminated under various scenarios as of December 31, 2018. Due to the number of factors that affect the nature and amount of any benefits under the various scenarios, actual amounts paid or distributed may be different.
Under our employment arrangements with each of Messrs. Ellison, Lowe, Gray and Dittrich, in the event that his employment is terminated by us without “cause,” he may receive severance benefits of up to six months’ base salary. In these instances, we would also pay standard relocation costs to relocate the executive to his previous domicile prior to being relocated to the U.S. Virgin Islands or the Cayman Islands, as applicable. If any of our executives’ employment is terminated for cause, his employment may be terminated without notice and with no liability to make any further payment to him, other than amounts accrued and unpaid as of the date of his termination.
In order to obtain the benefits provided under each executive’s termination provisions, the executive would first be required to execute a release of claims with us that would include a waiver and release of any and all claims he may have against us. As of December 31, 2018, the separation payment each executive would have received upon termination, other than for cause, based on a six-month separation payment, would have been $225,000 for Mr. Ellison, $225,000 for Mr. Lowe, $187,500 for Mr. Gray and $133,500 for Mr. Dittrich, as well as six months of medical insurance benefits for continued medical insurance benefits with a value of approximately $13,297 for Mr. Ellison, $13,186 for Mr. Lowe, $19,260 for Mr. Gray and $13,594 for Mr. Dittrich. Under the terms of their outstanding restricted stock award agreements, each of Messrs. Ellison, Lowe and Gray would have vested, and Mr. Ellison would have received vesting of common stock with a value of $1,519,178, Mr. Lowe would have received vesting of common stock with a value of $237,758 and Mr. Gray would have received vesting of common stock with a value of $69,534, based on AAMC’s closing stock price of $29.69 per share on December 31, 2018.
The Compensation Committee may in its discretion revise, amend or add to the benefits of each executive officer.
None of our executive officers currently has an arrangement in which they would be entitled to a payment on a change of control of AAMC, other than payments for termination described above to the extent the surviving party in a change of control transaction assumes the employment arrangements described above. Our named executive officers also have change in control agreements with Front Yard that provide for the payment of certain change in control compensation by Front Yard to such named executive officers if, within two years of a “Change of Control” of Front Yard (as defined therein), the executive is terminated without “Cause” (as defined therein) or terminates his employment with us for “Good Reason” (as defined therein). Pursuant to such change in control agreements with Front Yard, the obligation to pay the change in control amount is the obligation of Front Yard, not AAMC. Such payments would be reduced to the extent of AAMC severance payment amounts described above.
Pay Ratio
The below table shows the ratio of the median annual total compensation of all employees of the Company (excluding the Chief Executive Officer) to the annual total compensation of our Chief Executive Officer. In determining the median employee, a listing was prepared of all current employees as of December 31, 2018. To determine the median employee, we included the annual base salary as of December 31, 2018 and incentive compensation related to the 2018 fiscal year. Once the median employee was identified, for purposes of comparison to the Chief Executive Officer, we then calculated the total cash compensation for that employee in the same manner as the total cash compensation (Base Salary plus Non-Equity Incentive Compensation) shown for our CEO in the Summary Compensation Table.
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| | | | |
Median employee total annual compensation1 | | $ | 22,468 |
|
Mr. Ellison, Chief Executive Officer, total annual compensation | | $ | 2,456,231 |
|
Ratio of Chief Executive Officer to median employee compensation | | 109:1 |
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1 Approximately 74% of our employees are located in our India subsidiary where compensation is substantially lower as denominated in U.S. dollars. The median salary of our India-based employees was $15,150, which generated a substantially higher ratio of Chief Executive Officer to median employee compensation. When comparing Chief Executive Officer compensation to median employee compensation of all our non-India employees located in the U.S. Virgin Islands, United States and Cayman Islands of $225,000, the ratio of Chief Executive Officer to median non-India employee compensation would have been only 11:1.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on the review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
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| | |
| | Compensation Committee: |
May 21, 2019 | | Nathaniel Redleaf, Chair |
| | Ricardo C. Byrd, Director |
| | John P. de Jongh, Jr., Director |
EXECUTIVE COMPENSATION
This section discusses the material components of our executive compensation program for our NEOs. We believe an effective executive compensation program aligns executives’ interests with stockholders by rewarding performance designed to increase stockholder value. We seek to promote individual service longevity and to provide our executives with long-term incentive opportunities that promote consistent, high-level performance. The Compensation Committee evaluates both performance and compensation annually to ensure that we maintain our ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of peer companies, subject to consideration of the Company’s own financial performance. To achieve these objectives, we generally believe executive compensation packages should include both cash and equity-based compensation that rewards performance as measured against established goals.
For 2020, our NEOs and their positions as of December 31, 2020 were as follows:
Indroneel Chatterjee, Chief Executive Officer
George G. Ellison, Former Chief Executive Officer
Robin N. Lowe, Chief Financial Officer
Stephen H. Gray, General Counsel and Secretary
The Company experienced a management transition during 2020 and 2021. In connection with the transition contemplated by the Termination and Transition Agreement, dated August 13, 2020 (the “Termination Agreement”) between the Company and Front Yard Residential Corporation (“Front Yard”), Mr. Ellison resigned as Co-Chief Executive Officer of AAMC on December 29, 2020, Mr. Lowe resigned as Chief Financial Officer effective December 31, 2020, and Mr. Gray resigned as General Counsel effective December 31, 2020. Following these departures, Mr. Chatterjee served as the Company’s sole Chief Executive Officer and Christopher Moltke-Hansen became Chief Financial Officer. On April 16, 2021, following an independent inquiry by its counsel, the Board terminated Mr. Chatterjee’s employment for cause and without additional compensation for violations of the Company’s Equal Employment Opportunity, Prevention Against Harassment, and Conduct on the Job Policies. The Board appointed Mr. McCarthy as interim Chief Executive Officer as it conducts a search for a permanent Chief Executive Officer. Mr. Moltke-Hansen resigned as Chief Financial Officer on April 24, 2021, and Mr. Krallman became our Chief Financial Officer in June 2021.
Summary Compensation Table
The following table discloses compensation received by our named executive officersNEOs for the fiscal years 2016, 20172019 and 2018.2020*:
Indroneel Chatterjee(4)
Chief Executive Officer and Chairman | | | 2020 | | | $649,038(5) | | | $800,000(6) | | | $786,600(6) | | | $636,733(6) | | | — | | | $184,097(7) | | | $3,056,457 |
| 2019 | | | — | | | | | | — | | | | | | — | | | — | | | — |
George G. Ellison(8)
Former Chief Executive Officer | | | 2020 | | | $482,307(9) | | | | | | — | | | | | | $947,500(10) | | | $229,880(11) | | | $1,659,687 |
| 2019 | | | $472,692 | | | | | | $1,049,991 | | | | | | — | | | $1,395,353 | | | $2,918,036 |
Robin N. Lowe(12)
Chief Financial Officer | | | 2020 | | | $482,307(13) | | | | | | — | | | | | | $350,000(14) | | | $58,502(15) | | | $883,502 |
| 2019 | | | $472,692 | | | | | | $259,596 | | | | | | — | | | $89,197 | | | $821,485 |
Stephen H. Gray(16)
General Counsel and Secretary | | | 2020 | | | $390,923(17) | | | | | | — | | | | | | $315,000(18) | | | $154,530(19) | | | $860,453 |
| 2019 | | | $384,077 | | | | | | $149,995 | | | | | | $150,000 | | | $448,286 | | | $1,132,358 |
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Name and Principal Position | | Year | | Salary (1) | | Stock Awards | | Non-Equity Incentive Compensation (2) | | All Other Compensation (3) | | Total |
George G. Ellison, Chief Executive Officer | | 2016 | | $ | 450,000 |
| | | $ | — |
| | | $ | 450,000 |
| | $ | 111,985 |
| (4) | | $ | 1,011,985 |
|
| 2017 | | 450,000 |
| | | 1,270,167 |
| (5 | ) | | 450,000 |
| | 498,090 |
| (4) | | 2,668,257 |
|
| 2018 | | 450,000 |
| | | 1,055,992 |
| (5 | ) | | 300,000 |
| | 650,239 |
| (4) | | 2,456,231 |
|
Robin N. Lowe, Chief Financial Officer | | 2016 | | $ | 450,000 |
| | | $ | — |
| | | $ | 400,000 |
| | $ | 120,990 |
| (6) | | $ | 970,990 |
|
| 2017 | | 450,000 |
| | | — |
| | | 400,000 |
| | 108,137 |
| (6) | | 958,137 |
|
| 2018 | | 450,000 |
| | | 249,987 |
| (7 | ) | | 350,000 |
| | 87,387 |
| (6) | | 1,137,374 |
|
Stephen H. Gray, General Counsel and Secretary | | 2016 | | $ | 350,000 |
| | | $ | — |
| | | $ | 210,000 |
| | $ | 116,795 |
| (8) | | $ | 676,795 |
|
| 2017 | | 361,538 |
| (9) | | — |
| | | 210,000 |
| | 259,245 |
| (8) | | 830,783 |
|
| 2018 | | 373,462 |
| (9) | | 150,005 |
| (10 | ) | | 150,000 |
| | 241,247 |
| (8) | | 914,714 |
|
Rene Dittrich, Chief Accounting Officer | | 2016 | | $ | — |
| | | $ | — |
| | | $ | — |
| | $ | — |
| | | $ | — |
|
| 2017 | | 175,000 |
| (11) | | — |
| | | 140,000 |
| | 74,878 |
| (12) | | 389,878 |
|
| 2018 | | 265,923 |
| (11) | | — |
| | | 120,000 |
| | 127,928 |
| (12) | | 513,851 |
|
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*
| Certain amounts have been corrected for immaterial errors from our Annual Report. |
(1)
| Represents amounts paidAmounts represent the aggregate grant date fair value of restricted shares and option awards granted to our NEOs, calculated in accordance with FASB ASC 718. Such grant date fair value does not take into account any estimated forfeitures. The assumptions used in calculating the grant date fair value of restricted shares and option awards are set forth in Note 8 to our Consolidated Financial Statements for the year ended December 31, 2020 included in our Annual Report. The amount reported in this column reflects the accounting cost for these awards and does not correspond to the actual economic value that may be received by AAMC in the corresponding year.directors upon the vesting of the restricted shares, the exercise of the stock options, or any sale of the underlying shares of common stock. |