Janus Capital Group Inc.’s (JNS) Chief Executive Officer (CEO) Richard Weil’s total compensation had been reduced to $6.1 million in 2011 from $20.3 million, including a signing bonus of $10 million, in 2010, according to a proxy filing on Thursday. Excluding the bonus paid in 2010, Weil's pay/salary suffered a 40% fall.
The filing states that the CEO’s pay cut is based on certain factors, including the company’s performance in 2011. Moreover, the reduction in compensation encompasses the shareholder vote, which was taken at the annual meeting in April 2011. Yet, these votes were only advisory as needed by Congress after the financial crisis.
Janus Capital will execute a new plan for Weil’s 2012 pay. The compensation will depend on the company’s operating income. Management will restrict Weil’s future possible annual pay at $10 million.
Despite of Weil’s arrival in 2010, Janus Capital has continued to report outflows from its funds in every quarter, since the middle of 2009. These outflows were attributable to the mixed performance of the funds. Moreover, for full year 2011, Janus Capital recorded 3.3% year-over-year decline in total revenue. In addition to that, net income declined to $142.9 million from $159.9 million in 2010.
Due to the economic slow down, many of the senior banking executives had been facing a pay slash. Apart from Janus Capital, some other large U.S. banks such as Bank of America Corporation (BAC), Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) are also trimming the compensation of their CEOs. However, the CEO of JPMorgan Chase & Co. (JPM) still has the benefit of a steady pay structure.
The company has the best-in-class investment boutique with the potential for AUM and revenue along with competitive leverage growth. However, the weakness in flows remains a matter of concern.
Though fixed income and global businesses are improving, headwinds persist and the company’s equity-heavy portfolio exposes it to the equity market volatility. Further, a low interest rate environment affects money market business. Nevertheless, given its healthy balance sheet, we believe Janus Capital has the potential to outperform its peers in the long run.
Janus Capital currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock.
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