On the surface, Harley-Davidson’s annual securities filing detailing how much its executives make shows Jochen Zeitz was paid $43.3 million in 2022.
However, Zeitz, the company’s chairman, president and chief executive officer, will need to return the company to its all-time highest value to actually earn or receive most of that pay, which is a sharp increase in total compensation from $18 million in 2021 and $9 million in 2020.
At Harley’s 2022 annual meeting, shareholders approved an aspirational incentive plan that offers Zeitz and other top executives at the Milwaukee-based motorcycle maker a combined 3 million shares in the company if its stock price reaches certain thresholds. Half of the shares would go to Zeitz.
"The goal of the Aspirational Incentive Plan is to incentivize exceptional performance that is highly aligned with shareholder outcomes," Harley's annual proxy statement says.
The plan was approved by 64% of Harley's shareholders while just 37% of shareholders approved the company's overall executive compensation plan in an advisory vote.
H Partners Management, an independent investment firm that owns around 8% of the company initially proposed the plan. H Partners increased its stake in Harley over the course of 2021 and Harley added a representative of the firm to its board
after it expressed concern about executive compensation, corporate governance and board compensation.
The minimum threshold to earn any of the shares is a stock price of $70 per share by Dec. 31, 2025. At that point, Zeitz would earn 375,000 of the shares. Another quarter of the shares would be earned at $90, $110, and $130 per share respectively.
When the stock awards were officially granted by the company on Aug. 19, Harley’s stock was trading around $41.20 per share. This week, it has traded around $36 to $38 per share.
Harley’s stock has topped $70 per share two previous times, in late 2006 and in mid-2014. However, at those times there were significantly more shares of company stock outstanding. In 2006, there were around 257 million shares outstanding and in 2014 there were around 220 million.
Currently, the company has around 144 million shares outstanding, putting its market capitalization around $5.3 billion.
Reaching the $130 per share stock value would require more than tripling Harley’s value to almost $18.8 billion based on the current number of shares, a value that is in the neighborhood of the company’s all-time high.
Around $32 million of Zeitz’s total compensation for 2022 came from shares related to the aspirational plan based on the accounting treatment of the award. The first tranche of 375,000 shares would be worth a little more than $26 million if Zeitz were to hit the target at the end of 2025. If Harley reached $130 per share, the 1.5 million shares Zeitz could receive would be worth $195 million.
Beyond the aspirational plan, Zeitz’s base salary decreased from $2.5 million to $1.9 million, a change the company made based on shareholder feedback. His non-equity incentive plan compensation decreased from $3 million to $2.74 million, made up of short-term incentive payments.
Even though Harley saw an increase in operating income from 2021 to 2022, the short-term incentive payment went down as the company had maxed out its short-term incentive in 2021 and did not repeat that level this past year.