At the heart of the lawsuit is a series of raises Sculptor’s board granted Levin, which culminated last year when he became one of the highest-paid CEOs of any publicly traded US company, earning more than the leaders of Goldman Sachs Group Inc. and JPMorgan Chase & Co.
“Remarkably, he has demanded -- and the increasingly supine board has agreed to -- an ever larger share of returns, catapulting his pay to stratospheric levels,” the plaintiffs said in the complaint.
In 2019, they and others relinquished some of their ownership in the hedge fund and decided to forgo annual payouts of profits on their remaining stakes until 2026 at the latest, according to the lawsuit. The idea was to give Sculptor leeway to spread this equity among the new cadre of executives and invest for the future. In exchange, some thresholds were put in place to restrict how easily new pay packages could be negotiated.
Levin, nonetheless, secured increasingly lucrative deals. His nine-figure compensation for last year was a complex mix of cash and equity granted under separate contracts for each of his roles -- a highly unusual arrangement for a leader of a public company.
Lackluster Performance
Proxy adviser Institutional Shareholder Services criticized several aspects of Levin’s compensation: the disparity between payouts and the firm’s lackluster long-term share performance and relatively small market value; the size of Levin’s bonuses and awards; and Sculptor’s apparent lack of responsiveness to shareholders who raised concerns.
The plaintiffs also questioned whether some of the board members who approved Levin’s pay arrangements were truly independent. One is Wayne Cohen, Sculptor’s chief operating officer, who reports directly to Levin. Another, Chairperson Marcy Engel, who led the committee that negotiated Levin’s most recent pay, saw her own fee for serving on the board almost double in 2021, according to the complaint.
Earlier this year, board member J. Morgan Rutman quit, saying in a letter that he was frozen out of the decision over Levin’s compensation because he opposed it. Rutman had been the sole board representative chosen by Och, a billionaire who now runs his own family office, Willoughby Capital, where Rutman is president.
Sculptor said in a filing that Rutman’s letter is “filled with significant factual inaccuracies, material omissions and baseless assertions that present a misleading view of board governance.”
In a previous statement to Bloomberg, the firm wrote of its CEO’s pay package: “The majority of the reported compensation has not been received by Mr. Levin and requires that substantial shareholder return thresholds are met over a multiyear vesting period, aligning pay to performance for our shareholders and clients.”
--With assistance from Jef Feeley.