By Rich Kirchen
To comply with Securities and Exchange Commission rules, Harley-Davidson Inc. reported that total compensation for the company’s top executive Jochen Zeitz nearly doubled in 2021 to $18.1 million but the actual increase was a smaller, but still significant at 24%.
The higher compensation for CEO Zeitz isn’t surprising because Milwaukee-based Harley-Davidson (NYSE: HOG) announced in December 2021 signing a new incentives-driven compensation package designed to keep him on the job for at least another three years. The company’s recent proxy statement shows total compensation for 2021 that includes over $6.4 million in stock-option awards that Zeitz is eligible to receive in future years but wasn’t part of his actual compensation.
Zeitz will win those future option awards only if he and the company achieve stock price targets ranging from $45 per share to $60 per share and hit financial-performance and other goals between 2023 and 2024. Harley stock closed Thursday at $38.20 and traded in a range of $32.13 to $52.06 over the past year.
SEC disclosure rules require Harley-Davidson to report the full value of the option-awards for Zeitz when the company granted them in December 2021 even though he can exercise the options in the future only if Harley’s stock price reaches the performance hurdle for 10 days and he remains employed by the company.
A Harley-Davidson spokesman declined to comment Thursday on the compensation figures for Zeitz in the proxy statement.
Zeitz, 58, became Harley-Davidson’s CEO in May 2020, succeeding Matt Levatich and now holds the title of chairman, president, and CEO. Zeitz is the former chairman and CEO of PUMA AG and joined the Harley board in 2007.
Total compensation in 2021 for Zeitz, including the stock-option awards, was $18,105,568 compared with $9,388,942 in 2020.
For 2021, the main drivers of his higher total compensation were the $6.4 million in stock-option awards, a $1.5 million increase in non-equity incentives, a $1 million increase in stock awards and an $817,308 increase in salary to $2.5 million. The one category where Zeitz saw a decrease was his bonus, which was zero in 2021 compared with $1 million in 2020.
The company said in the proxy that the option awards for Zeitz in future years are designed to deliver financial and stock-price improvements that reward the company and its shareholders.
Harley-Davidson said in its December announcement that its board believes it is imperative for Zeitz to remain CEO to provide continuity as the company continues implementing “The Hardwire” five-year strategic plan he unveiled in February 2021. The plan includes goals of increasing profit margins; boosting growth in Harley’s financial services unit; investing in profitable “core product segments” of touring, large cruiser, and trike; and expanding into adventure touring while increasing volume within the cruiser segment.
The Harley-Davidson board said Zeitz has done an effective job restructuring the company and defining the new strategy that positions the company well for the future.
“The (human resources) committee and the board are proud that Mr. Zeitz will remain Chief Executive Officer and believe he will be highly motivated to continue his service and to create shareholder value,” the company said in the December press release.
The new compensation package for Zeitz includes reducing his 2022 base salary by $600,000 from the 2021 level of $2.5 million. The company’s board increased his performance-based pay by the three-year grant of the performance-based stock options.
The new agreement also includes a target annual bonus opportunity of $2.4 million, the company said.
Harley-Davidson said in December the stock options provide a significant incentive for Zeitz to continue as CEO or in another board-approved role.
In general, Zeitz cannot exercise stock options if he does not continue as CEO through Dec. 31, 2023, the company said. The remainder of the options will vest only if he continues as CEO through Dec. 31, 2024, the company said.
