Jefferies’ plan to pay two executives $78m of incentive compensation could hurt the firm’s bondholders, Moody’s Investors Service said.
'While Jefferies has outperformed its peers, an excessive focus on short-term compensation has been at the root of many outsized trading, credit and litigation losses at investment banks', Moody’s said Monday in a report.
Jefferies said last week it would pay Chief Executive Officer Richard Handler $58m in 2012 and future pay, according to a filing from the New York-based firm. Brian Friedman, 57, chairman of the firm’s executive committee, is set to receive $53.3m in 2012 and future compensation. Those figures include $39m for each executive in restricted stock awards for the next three years, which was the focus of the Moody’s report.
The relationship between short-term vesting periods for pay and outsized trading losses have led regulators to require investment bank boards to consider longer compensation terms, lower payouts and more clawbacks, Moody’s said in the report. Those guidelines have not been 'substantially implemented' at Jefferies, the ratings firm wrote.
In the meantime, Bloomberg reports that Royal Bank of Canada has increased Chief Executive Officer Gordon Nixon’s 2012 total compensation by 25% from a year earlier as the country’s largest lender beat its financial targets and posted record annual profit.
Nixon, 56, received total comp of US$12.6m. The amount excludes pensions.