Lennar
Annual meeting: April 12, 2022
Total compensation for Lennar Executive Chairman, Richard Beck, increased 54% from last year, from $25,169,936 to $38,852,076. This represents an ongoing steeply upward and problematic trend. Most noticeable has been the increase of the bonus – from $7,737,307 in 2019, to $11,255,756 in 2020, and $18,921,275 in 2021. This bonus component alone is above the total compensation (including salary and equity) made by many S&P 500 CEOs.
Even more problematically, in addition to Beck the company has two co-CEOs Rick Beckwitt and Jonathan Jaffe (possibly the only case of such a job share at an S&P 500 company). Each of them is paid more than most CEOs: $34,045,217 in the most recent year. I’ve been hearing more investors talking about compensation “quantum.” By definition quantum means an allowed amount as it is used by investors it is a word that suggests that sometimes pay can be excessive; the amount can be too high on its face. That is the case here.
Lennar has appeared on our list of companies of overpaid CEOs in seven out of the last eight years. Why does the board not respond? In part it is because the company has dual-class shares so it is to some extent insulated from the will of shareholders. The company has Class B stocks where each share gets 10 votes. This structure means that the largest number of shareholders have less influence than they should. In this case, Stuart Miller owns 59.1% of class B stock and GAMCO Investors own an additional 7.2%. This means that Miller has extra leverage: the proxy statement reported that his vote represents 35.1% of the combined votes that could be cast by all the holders of Class A common stock and Class B common stock.
This structural issue is one of the reasons we have moved to looking more closely at institutional votes when we evaluate Overpaid CEOs for our annual report. In 2021, 36% of institutional shareholders voted against pay at Lennar, but the reported opposition was only 16%. Both numbers reflect opposition well beyond the average, but the second figure is starker and a more accurate reflection of shareholder dissatisfaction.
Lennar was number 60 on our list of Overpaid CEOs from last year, and frankly the company would have been much higher if we considered all executives, not just the CEO.