Bloomberg News

Jefferies CEO Discloses $200 Million of Deferred Pay

April 11, 2007

Richard Handler, the chairman of Jefferies Group Inc. (JEF:US), stashed away more than $200 million in deferred compensation since joining the brokerage 17 years ago, mostly through stock awards he received in lieu of cash.

Jefferies, a New York-based brokerage, disclosed the size of Handler's nest egg for the first time in a proxy statement filed yesterday with the U.S. Securities and Exchange Commission. The deferred stock awards became more valuable as the company's stock soared.

Handler, 45, ``made an equity risk along with other shareholders and it must have turned out well for him,'' said Alan Johnson, the managing director of Johnson Associates Inc., a New York compensation consultant that specializes in the financial services industry. ``It's hard to complain about that.''

The SEC adopted rules last July that require public companies to begin providing new details this year on deferred compensation, including the entire amount that top executives have squirreled away, said Jannice Koors, a managing director at New York-based compensation consulting firm Pearl Meyer & Partners. ``That number has never ever been disclosed anywhere'' Koors said.

Rising Share Price

According to yesterday's proxy statement (JEF:US), Handler had $201.7 million of deferred compensation at the end of 2006. That included $151.2 million of deferred stock bonuses plus appreciation, $10.9 million in a company deferred compensation plan, and $39.6 million Handler had earned as head of the high yield division and placed in a self-directed deferred account.

The deferred compensation disclosure shows how Handler has come to own almost 10 percent of Jefferies shares since signing on as an executive vice president in 1990. By delaying income taxes on his stock bonuses until age 65, Handler reaped the full benefit of Jefferies' rising share price, which increased at an average annual rate of almost 26 percent since 2000.

Most investment bankers who receive stock bonuses must sell or forfeit shares to pay federal income taxes of as much as 30 percent that come due when they receive full title to the awards. By placing his grants in deferred compensation accounts, Handler put off these taxes until he reaches age 65, eliminating the need to sell shares and allowing him to fully capture the gains in Jefferies' stock market value.

``He chose to defer his stock awards instead of cashing them out when they vested and going to buy a boat,'' said Koors, the New York compensation consultant. ``It doesn't mean he got a better deal than somebody at another company.''

Jefferies spokesman Tom Tarrant declined to comment.

Started With Milken

After graduating from Stanford University with an MBA in 1987 and working with Michael Milken at Drexel Burnham Lambert Inc., Handler joined Jefferies and co-founded its high-yield bond division. Now chief executive officer as well as chairman, Handler took most of his pay in the form of company stock, and by the end of 2006 had built up a 9.6 percent stake comprised of 11.7 million company shares.

In general, the deferred compensation totals disclosed this year have often been lower than anticipated, according to Mark Borges, a former SEC attorney who is now a principal at Mercer Human Resource Consulting in Washington.

``We were all expecting to see $100 million in everybody's account, but that wasn't the case,'' Borges said in an interview today. Borges said many of the proxies he has reviewed show executives have accumulated less than $1 million in deferred salaries and bonuses.

To contact the reporter on this story: Miles Weiss in Washington at

To contact the editor responsible for this story: Erik Schatzker at

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