LPL Financial's lackluster performance in 2014 meant a 10% pay cut for chairman and chief executive Mark Casady, but the independent broker-dealer's board of directors clearly wants Casady to stick around -- and will make it worth his while to do so.

Casady's total compensation for 2014 was $5.5 million, compared with $6.1 million in 2013, according to the financial service company's 2015 proxy statement released this week. LPL's compensation committee cited "lagging earnings results" in explaining the cut; the company's net income in 2014 declined 2% to $178 million and earnings per share only rose 1.7% to $1.75.

The big cut came in Casady's bonus payment, which at $1.4 million was only 60% of his target. "That's a pretty big hit, losing almost half your bonus," says Todd Sirras, managing director for Semler Brossy, a Los Angeles- and Princeton, N.J.-based executive compensation consulting firm.
At one of LPL's chief rivals, Raymond James Financial, CEO Paul Reilly received $5.6 million in total compensation in 2014, the same as in 2013, according to the company's proxy statement. Raymond James' earnings per share, however, increased nearly 30% to $3.32, compared to LPL's more modest increase.

Casady's compensation was "reasonablerelative to market comparables and for the performance delivered and sensitiveto company performance over time," according to a performance alignment report on the company from Farient Advisors, an executive compensation and performance consulting firm with offices in New York and Los Angeles.

LPL says in its proxy that Casady's compensation "was below market median, particularly with regard to long-term incentives."


LPL's board also gave Casady some sweet incentives to stay with the company and improve its performance.

Casady was awarded a long-term equity incentive target of 350% of his 2014 base salary of $900,000, for a target dollar amount of $3.1 million. But Casady also received $6 million in options this month, according to an LPL filing, in the form of 400,000 shares at a strike price of $45.50, delivered in annual installments over the next three years.

LPL shares have been trading in the $40 to $46 range this year.

Casady's compensation going forward was designed to align "with stockholder value creation over the long term, and to further strengthen the retention elements of Mr. Casady's pay, particularly following the termination of his employment agreement in February 2014," the LPL proxy statement says.

Accordingly, the statement continues, the compensation committee increased the equity component of Casady's total compensation, granting Casady "a long-term incentive award consisting solely of stock options that are scheduled to vest ratably over three years."

"It's clear that [LPL] is pivoting to less risk [in compensation] in the short term and more performance incentives in the long term," says Farient CEO Robin Ferracone.

Yet she and Sirras both note the discrepancy between the stated target and the options granted. "A long-term incentive award that's twice the size of the target is fairly huge," Sirras says. "It's a strong sign of support from the board that they want him around."

Ferracone adds that the long-term incentives are all in the form of highly leveraged options, "encouraging risk."

"The question is," she adds: "Why did they double up on the target LTI grant this year?"


LPL increased Casady's salary last year by nearly $100,000 to $900,00. The compensation committee increased his target total compensation "in light of his role, experience, and tenure with the company, as well as the desirability of his skill set," the proxy states.

If things don't work out with LPL over the long term, Casady also gets a solid Plan B. If he is fired "without cause or for good reason," the proxy statement notes, he will receive a severance package of about $4 million, including $900,000 in severance and an almost $1.5 million bonus, as well as $1.5 million in accelerating vesting of stock options.

The proxy statement also spells out pay packages for other current and former top LPL executives.

LPL president Dan Arnold, who until earlier this month served as LPL's CFO, received $2.2 million in total compensation last year, although his bonus payout was 35% short of his target.

Robert Moore, who was president in 2014 but left to join an asset management firm in Chicago earlier this month, received $3.4 million in total compensation. Moore's bonus pay was also reduced by 35%.

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