Lennar
Annual meeting: April 7
The top-paid executive at Lennar in 2020 was Executive Chairman Stuart Miller, whose total compensation was $25,169,936. In addition to an executive chairman paid at a high level, the company has two co-CEOs, an expensive and frowned upon practice. Co-CEOs Rick Beckwitt and Johnathan M. Jaffee had total compensations of $21,983,118 and $19,352,016 respectively.
The largest component of each of these packages was non-equity incentive compensation, (NEIC) or bonus. The cash bonus for Miller, Beckwitt and Jaffe is based solely on a percentage of pretax income, which the company defines as “net earnings attributable to Lennar plus/minus income tax expense/benefit (“Pretax Income”), after a capital charge equal to 7.3% of tangible capital.” The three bonuses totaled over $29 million, and would have been even higher, had the company not taken the one-time, COVID-related actions described below.
In making the bonus calculation, Lennar eliminates goodwill charges, losses or expenses on early retirement of debt, impairment charges, and acquisition or deal costs related to the purchase or merger of a public company. The decisions on how to calculate such bonuses are controversial. A structure such as the one Lennar created, may incentivize executives to put losses in those buckets. For example, a purchase or merger would typically raise pretax income, but any losses that result from a merger would not affect pay, as they are excluded from the bonus calculations.
It should also be noted that these executives took a positive action because of COVID hardships. "The Company decided to give a one-time payment of $1,500 to each Lennar associate making less than or equal to $75,000 a year." The company reports that the amount was deducted from potential NEIC of Executive Chair and the co-CEOs “at their request.” Many shareholders will likely vote against the package, even while approving of this particular action.
Lennar has been on As You Sow’s list of companies with overpaid CEOs for at least the last three years, and I wrote about its history of overpay in 2019.