Focus Financial Cuts Exec Comp, CEO Pay Falls 16.6%
Focus Financial Partners executives including CEO Rudy Adolf saw 16%-plus declines in their compensation last year as the company missed growth targets in the pandemic-afflicted year.
Adolf and Focus’ four other named executives saw roughly 20% declines to their cash and equity incentive awards from the prior year, largely attributed to the company’s missed targets for year-over-year revenue growth, according to the statement. Estimated revenue growth for 2020 of 9.8%, or $119.4 million, fell well short of the minimum target of 15%, or $185 million, for payout of bonuses, the statement indicated.
Focus’ other named executives–Chief Operating Officer Rajini Sundar Kodialam, Head of M&A Leonard Chang, Chief Financial Officer James Shanahan and General Counsel J. Russell McGranahan–saw declines of 16.13% to 17.23% to their total compensation, in-line with the cuts to Adolf’s pay.
A spokeswoman for Focus declined to comment on the company’s compensation decisions.
The revenue growth target accounted for 25% of a framework of four equally-weighted criteria used to determine the incentive pay, according to the statement. The company exceeded or met the three other targets, including growth in adjusted net income excluding tax adjustments, growth of profit per share, and subjective qualitative assessments.
In authorizing the portion of bonus related to qualitative criteria, the compensation committee cited executives’ “overall strong performance … especially with respect to management of the business during the uncertainty of the pandemic.”
Despite a pandemic-related slowdown in M&A activity in the first quarter of 2020, Focus still eked out 25 transactions in 2020, including seven new partner firms with $22.1 million in total acquired base earnings, and 18 ‘tuck-ins’ into existing partner firms, according to the statement.
The company in 2019 closed a record 34 acquisitions including buying six firms with $35.1 million in combined earnings and financing 28 tuck-ins.
In a testament to the pandemic’s effects in curtailing travel, Adolf’s reimbursement from Focus for his private jet expenses fell to $1.3 million in 2020, representing a roughly 31.6% decline from $1.9 million a year earlier, according to the statement.
Focus reimburses Adolf, who purchased his own personal aircraft, for “certain costs and third-party payments” associated with his business use of the plane.
“Given the geography of our partner firms and prospects, we believe the use of the private aircraft creates efficiencies to enhance the productivity of Mr. Adolf and certain other authorized personnel,” the filing said.
The compensation cuts at Focus are similar to those at several large brokerage firms last year.
Raymond James Financial, for instance, slashed pay for its top executives, including a 17% pay cut for its CEO, Paul Reilly, citing a decline in net income and pandemic-related economic uncertainty. LPL Financial CEO Dan Arnold’s compensation suffered a lesser blow of 5.4%, as the pandemic weighed down the independent broker-dealer’s earnings.