filings.toolsItem 11. EXECUTIVE COMPENSATION
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Item 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Philosophy
In general, our compensation program for our employees has three primary objectives: (1) to attract, motivate and retain them, (2) to align their interests with those of our stockholders and other stakeholders and (3) to reinforce our culture and values.
Our employees. Our business is dependent on the services of our employees, including our named executive officers. Among other things, we depend on their ability, where applicable, to find, select and execute investments, manage and improve portfolio company operations, find and develop relationships with fund investors and other sources of capital, find, select and execute capital markets opportunities, and operate our various businesses, and we cannot compete effectively without their continued employment with us. Therefore, it is important that our key employees are compensated in a manner that motivates them to excel consistently and encourages them to remain with the firm.
Alignment of interests. Management equity ownership in the businesses in which we invest has been a guiding principle throughout our firm's history, and we apply that principle to ourselves: every senior employee of the firm is expected to have an equity interest in KKR. This equity ownership serves to align the interests of our senior employees, including our named executive officers, with those of our stockholders. In addition, because we invest in and alongside our investment funds and have a carry pool from which we can allocate to our senior employees 40%, 43% or 65%, as applicable, of the carried interest that we generate through our business, we believe that our senior employees' interests are also aligned with those of our investors in the funds, vehicles and accounts that we manage, which in turn benefits our stockholders. Moreover, senior Global Atlantic employees have equity interests based on the long term performance of Global Atlantic, which we believe aligns their interests with those of its various stakeholders.
Culture and values. One of our most important values for our senior employees is our "one firm" approach with shared responsibility and success, and we also subscribe to a culture of meritocracy and fairness. Therefore, compensation for our senior employees is based on the performance of the firm as a whole as well as on an individual's contributions to the firm. For example, we generally do not compensate our senior employees based merely on an individual's accomplishments in relation to the profits and losses of his or her business unit. In addition, we conduct, at least annually, an evaluation process based on input from a wide range of persons regarding each employee's contribution to the firm, including his or her commitment to the firm's culture and values. We believe that using this kind of an evaluation process also promotes a measure of objectivity as a balance to a single manager's judgment.
We refer to our two Co-Executive Chairmen (Henry Kravis and George Roberts), our two Co-Chief Executive Officers (Joseph Bae and Scott Nuttall), our Chief Financial Officer (Robert Lewin) and our General Counsel and Secretary (David Sorkin) as our "named executive officers" for the year ended December 31, 2021. We believe that the elements of compensation discussed below for our named executive officers serve these primary objectives. We are not required to conduct say-on-pay or say-on-frequency votes under the Dodd-Frank Act. However, we intend periodically to review the elements of our compensation, and we may make changes to the compensation structure relating to one or more named executive officers based on the outcome of such reviews from time to time.
KKR Holdings
Each of our named executive officers holds interests in our business through KKR Holdings, which is the entity that indirectly owns all of the outstanding KKR Group Partnership Units that are not allocable to us, including KKR Holdings II.
KKR Holdings units are, subject to certain restrictions, exchangeable for shares of our common stock, on a one-for-one basis, and generally cannot be sold to third parties for monetary value unless they are first exchanged for shares of our common stock. Because KKR Holdings units are exchangeable for shares of our common stock, we believe that our named executive officers' interests are aligned with those of our stockholders.
KKR Holdings, from time to time, receives distributions that are made on KKR Group Partnership Units that are held by it. To the extent such distributions are received on KKR Group Partnership Units that underlie any KKR Holdings units that have satisfied their respective vesting requirements, if any, at the time distributions are declared on the underlying KKR Group Partnership Units, such distributions will be allocated and further distributed to the named executive officers as and when received. To the extent that such distributions are made on KKR Group Partnership Units underlying any KKR Holdings units
that have not satisfied all vesting requirements at the time distributions are declared on the underlying KKR Group Partnership Units, such distributions may be allocated or otherwise applied in such amounts and in such manner as Messrs. Kravis and Roberts, acting through the general partner of KKR Holdings, may determine. As of February 24, 2022, approximately 1.1 million KKR Holdings units remain unallocated, which as discussed below, Messrs. Kravis and Roberts are authorized to allocate to themselves or others.
In 2021, our named executive officers received distributions from KKR Holdings, including distributions relating to tax liabilities, as well as dividends on shares of common stock they own, and because these distributions and dividends are not considered to be compensation, they have not been reported in the Summary Compensation Table.
As part of the transactions contemplated by the Reorganization Agreement, 500,000 outstanding KKR Holdings units held by each of Messrs. Kravis and Roberts and 1,455,000 outstanding KKR Holdings units held by each of Messrs. Bae and Nuttall, each of which had previously been scheduled to vest on October 1, 2022, will be accelerated to vest immediately prior to the closing of the mergers contemplated by the Reorganization Agreement, and such KKR Holdings units will become vested and receive their allocable share of the common stock contemplated to be issued pursuant to the Reorganization Agreement. The customary one- and two-year transfer restrictions applicable to such KKR Holdings units will continue to apply to the shares to be received in exchange therefor pursuant to the Reorganization Agreement until October 1, 2023 and October 1, 2024. The 500,000 KKR Holdings units held by each of Messrs. Kravis and Roberts are already considered fully vested given their age and years of service at KKR. In the case of Messrs. Bae and Nuttall only, in exchange for the accelerated vesting, each of their 1,455,000 KKR Holdings units (or shares of common stock to be received in respect thereof) will be subject to forfeiture if such executive is not employed by KKR on October 1, 2022 (except in the case of death or permanent disability).
In addition, KKR Holdings allocated 1,150,000 KKR Holdings units to each of Messrs. Bae and Nuttall, of which 30% will be subject to forfeiture if such executive is not employed by KKR on October 1, 2022 (except in the case of death or permanent disability). The number of KKR units allocated to Messrs. Bae and Nuttall was determined by Messrs. Kravis and Roberts, and the allocations were made as part of the transactions contemplated by the Reorganization Agreement, which were approved by our board of directors following the recommendation of the conflicts committee. These KKR Holdings units (or shares of common stock to be received in respect thereof) are subject to customary one- and two-year transfer restrictions that will apply, as applicable, until October 1, 2023 and October 1, 2024. Messrs. Kravis and Roberts are authorized to allocate the balance of any outstanding and unallocated KKR Holdings units, in their sole discretion, to themselves or others, on such terms as they determine, prior to the closing of the mergers contemplated by the Reorganization Agreement.
All of these KKR Holdings units represent KKR Group Partnership units that are already outstanding, and therefore their vesting and allocations as described above do not represent any incremental dilution to KKR.
Compensation Elements
Base Salary
For 2021, Messrs. Kravis, Roberts, Bae, Nuttall, Lewin and Sorkin were each paid an annual salary of $300,000. We believe that the base salary of our named executive officers should typically not be the most significant component of total compensation. Our Co-Executive Chairmen determined that $300,000 is a sufficient minimum base salary for our named executive officers.
Year-End Bonus Compensation
Our Co-Executive Chairmen did not receive any year-end cash bonus compensation in 2021. They have decided at this time not to receive any year-end cash bonus compensation, which permits our firm to make greater year-end cash bonus payments to our other employees in order to motivate and retain them for the benefit of the firm. See "—Other Compensation" below for certain incidental benefits provided to them by the firm.
In 2021, our Co-Chief Executive Officers were awarded year-end cash compensation as bonus payments that were determined by our Co- Executive Chairmen. In 2021, our Chief Financial Officer and General Counsel were awarded year-end cash compensation as bonus payments that were determined by our Co-Chief Executive Officers. Our Co-Executive Chairmen and Co-Chief Executive Officers made their subjective determinations by assessing our overall performance and the contributions that the named executive officer made to our development and success, as a firm, during the year. Certain factors that were considered when determining the size of their bonus payments include (i) their respective contributions and accomplishments in 2021 in terms of driving commercial results for the firm, leading and managing people, and living the firm's values; (ii) their respective performance and contributions relative to other senior employees at the firm; (iii) their respective performance and contributions in 2021 as compared to the prior year; and (iv) the overall financial performance of the firm in 2021 as compared to the prior year based on certain financial measures considered by management, including but
not limited to after-tax distributable earnings. More specifically, in assessing the contributions by Messrs. Bae and Nuttall, our Co-Executive Chairmen considered their services as Co-Presidents/Co-Chief Operating Officers and Co-Chief Executive Officers during 2021 and their day-to-day management of the firm's business as well as their joint leadership of the firm. In assessing Mr. Lewin's contributions, our Co-Chief Executive Officers considered his service as the Chief Financial Officer and his leadership and oversight of our finance, tax and accounting functions and related operations and his role with respect to strategic initiatives undertaken by the firm. In assessing Mr. Sorkin's contributions, they considered his leadership and oversight of our global legal, compliance, enterprise risk and internal audit functions and his role with respect to the strategic initiatives undertaken by the firm. Despite the ongoing pandemic, the firm experienced strong financial performance in 2021, with fee related earnings, after-tax distributable earnings and book value up significantly over the prior year. Based on the firm's positive 2021 results and the individual contributions described above, our Co-Executive Chairmen determined the aggregate size of the bonus payments to Messrs. Bae and Nuttall, and our Co-Chief Executive Officers determined the aggregate size of the bonus payments to Messrs. Lewin and Sorkin. In making these determinations, our Co-Executive Chairmen and Co-Chief Executive Officers considered the feedback from other employees. We believe that the discretion permitted to our Co-Executive Chairmen and Co-Chief Executive Officers permits them to award bonus compensation in an amount they determine to be necessary to motivate and retain these named executive officers.
The cash bonus amounts paid to our Co-Chief Executive Officers, Chief Financial Officer and General Counsel for 2021 are reflected in the Bonus column of the 2021 Summary Compensation Table below.
In prior years, certain named executive officers received equity awards as part of their annual year-end bonus compensation. In lieu of receiving an annual grant of equity awards for 2021 year-end compensation, certain named executive officers received long-term incentive equity awards, as well as certain grants in early 2021. See "—Incentive Awards" for a description of incentive equity awards granted in 2021.
Except as explained below for our Co-Chief Executive Officers for the next five years, a grant of equity awards in connection with year-end compensation could be made to our named executive officers after the date of this Annual Report.
Incentive Equity Awards
On February 18, 2021, certain of our named executive officers received grants of restricted holdings units subject to market price vesting requirements. Restricted holdings units are equity awards issued under our 2019 Equity Incentive Plan and provide the recipient with the right to exchange them on a one-for-one basis for our common stock after vesting and subject to satisfying certain other conditions. The overall objectives of these grants were principally to incentivize our most senior employees, to align their interests with those of our stockholders, and to retain them by providing meaningful long-term economic incentives. These awards were not designed to be a regularly recurring equity grant as part of an annual year-end compensation program. The number of restricted holdings units granted to our named executive officers was determined by our Co-Executive Chairmen. Following the approval of our board of directors, we made the following grants of restricted holdings units under our 2019 Equity Incentive Plan: 1,000,000 restricted holdings units to Mr. Bae, 900,000 restricted holdings units to Mr. Lewin and 300,000 restricted holdings units to Mr. Sorkin. Equity awards to the named executive officers were determined considering their existing relative levels of KKR equity ownership at such time.
The restricted holdings units granted to these named executive officers are subject to a market price vesting condition. Tranches of these restricted holdings units become eligible to vest upon the average closing price of KKR common stock during 20 consecutive trading days meeting or exceeding certain specified stock price targets between $45.00 and $70.00 per share, all of which have been achieved as of December 31, 2021. These restricted holdings units will vest on May 1, 2026 if the named executive officer continues to serve as an employee until that date, subject to certain exceptions. These restricted holdings units are subject to one- and two-year transfer restrictions after vesting and are subject to minimum retained ownership requirements.
On December 9, 2021, our board of directors approved grants of 7.5 million restricted holdings units to each of our then newly promoted Co-Chief Executive Officers, Messrs. Bae and Nuttall (the “CEO Awards”). These CEO Awards are intended to incentivize the Co-Chief Executive Officers to help drive stock price performance in a manner that is aligned with stockholder interests. KKR currently intends that no additional equity incentive awards will be granted to Messrs. Bae and Nuttall during the five years following the date of grant.
The CEO Awards have a market price vesting condition that would be met when the average closing price of KKR common stock during 20 consecutive trading days meets or exceeds certain stock price targets. For both recipients, 20% of their awards are eligible to vest at each of the following KKR common stock prices: $95.80, $105.80, $115.80, $125.80 and $135.80. These stock price targets represent a premium of 26%, 40%, 53%, 66% and 79%, respectively, relative to the KKR common stock’s closing price of $75.76 on December 9, 2021. In addition to the market price vesting condition, the CEO Awards have a cliff service vesting condition, which requires the Co-Chief Executive Officer to be employed by KKR on December 31, 2026 (with exceptions for involuntary termination without cause, death and permanent disability). The CEO Awards will be automatically forfeited upon the earlier of the Co-Chief Executive Officer’s termination of service (except for involuntary
termination without cause, death or permanent disability) or the failure to meet the market price vesting condition by December 31, 2028 (for which continued service is required if the market price vesting condition is met after December 31, 2026). The CEO Awards are subject to one- and two-year transfer restrictions after vesting and remain subject to minimum retained ownership requirements.
Carried Interest
We allocate 40%, 43% or 65%, as applicable, of the carried interest that we earn to a carry pool, from which our employees are eligible to receive a carried interest allocation. In February 2021, upon receipt of approval from a committee representing a majority of our independent directors, we amended the percentage of carried interest that is allocable to the carry pool to 65% for recently formed funds and future funds, while for older funds, it remains 40% or 43%, as applicable. The percentage of carried interest allocable to the carry pool may be increased only with the approval of a majority of our independent directors. Carry pool allocations for the named executive officers are made by first determining a total dollar value for the named executive officer's interest in the carry pool. Due to our Co-Executive Chairmen's unique status as Co-Founders of our firm, our Co-Founders determine their own allocation from the carry pool. Under the Reorganization Agreement, until KKR acquires control of the carry pool (which will occur no later than December 31, 2026), our Co-Founders will continue to make decisions regarding the allocation of carry proceeds to themselves and others, provided that any allocation of carry proceeds to the Co-Founders will be on a percentage basis, consistent with past practice. To make the total dollar value determination for the other named executive officers, our Co-Founders take into consideration the executive officer's involvement with investments and impact on the portfolio, the size of the executive officer's bonus as well as the recommendations by our Co-Chief Executive Officers and other factors similar to those considered when determining the size of the bonus, as described under "—Year-End Bonus Compensation." However, the total dollar value available to be allocated to the named executive officers and other employees is limited by the total amount of investments made by our investment funds during the fiscal year, and executive officers and other employees may not be allocated any dollar value of carry in any given year. For our older funds, carry pool allocations were determined based on a percentage applied on an investment-by-investment basis. After a total dollar value, if any, for each named executive officer is determined, such dollar value was then divided by the total allocable dollar value of investments made by our funds for the year, which yielded a certain percentage for the named executive officer. This percentage is then applied consistently to each investment made during the year. Because the size of each investment is different, the nominal amount of the carry pool allocation may differ by investment, although the percentage applied to each investment is consistent. For our more recent funds, carry pool allocations are determined based on a percentage applied on a fund-by-fund basis. The dollar value, if any, for each named executive officer is determined and then allocated to the applicable funds, and such dollar value is then divided by the total allocable dollar value of investments made by that fund for the year to yield a percentage for that particular fund. If carry is paid prior to the end of a fund's investment period, this percentage is applied at that time. At the end of the investment period, an adjustment would be made to account for any difference in percentages applied at the times carry was paid during the investment period (taking vesting into account) and the percentage determined for a particular fund based on the total dollar values allocated to the named executive officer for such fund divided by the total allocable dollars invested during the entire investment period of such fund.
The carried interest allocated to the carry pool is maintained and administered by KKR Associates Holdings, which, similar to KKR Holdings, is not currently a subsidiary of ours. Allocations of carried interest, including any reserved carried interest, are determined by our Co-Founders acting through the general partner of KKR Associates Holdings. On the Sunset Date (as defined in the Reorganization Agreement), KKR will acquire control of KKR Associates Holdings and will commence making decisions regarding the allocation of carried interest pursuant to the limited partnership agreement of KKR Associates Holdings. Until the Sunset Date, our Co-Founders will continue to make decisions regarding the allocation of carried interest to themselves and others, pursuant to the limited partnership agreement of KKR Associates Holdings, provided that any allocation of carried interest to the Co-Founders will be on a percentage basis consistent with past practice. For more information see “Certain Relationships and Related Transactions, and Director Independence—Reorganization Agreement” in this Annual Report.
Carried interest, if any, from the carry pool in respect of any particular investment or fund is only paid in cash after all of the following are met: (i) a realization event has occurred (e.g., sale of a portfolio company, dividend, etc.); (ii) the vehicle has achieved positive overall investment returns since its inception, in excess of performance hurdles where applicable, and is accruing carried interest; and (iii) with respect to investments with a fair value below cost, cost has been returned to fund investors in an amount sufficient to reduce remaining cost to the investments' fair value. To the extent any "clawback" obligation is triggered, carried interest previously distributed by the fund would have to be returned to such fund, thereby reducing the named executive officer's overall compensation for any such year. A portion of certain carried interest payable is generally not distributed to the recipient and is instead held in escrow in the recipient's name in order to enhance the recipient's ability to satisfy any future clawback obligation. Because the amount of carried interest payable is directly tied to the realized performance of the underlying investments, we believe this fosters a strong alignment of interests among the investors in those funds and the named executive officers, and thus benefits our stockholders. In addition, several of our competitors use participation in carried interest as an important incentive, and we believe that we must do the same in order to attract and retain the most qualified senior employees.
Participation in our carry pool for our senior employees, including our named executive officers, is subject only to service-based vesting with certain exceptions, including additional vesting upon death, disability or certain retirement events. In general, the vesting for carry pool allocations is over a four-year period (other than for our Co-Founders). Vesting serves as an employment retention mechanism and enhances the alignment of interests between a participant in our carry pool and the firm as well as the limited partners in our investment funds. Due to our Co-Executive Chairmen's status as Co-Founders of our firm, our Co-Founders are typically completely vested in their carry pool allocations upon grant.
Carry pool allocations after December 31, 2018, whether or not vested, are subject to forfeiture if the recipient violates his or her confidentiality and restrictive covenant agreement. See "—Narrative Disclosure to Summary Compensation Table and Grants of Plan‑Based Awards—Terms of Confidentiality and Restrictive Covenant Agreements."
Other Compensation
We have a program to match certain charitable donations made by our senior employees, including our executive officers, and we also pay for certain miscellaneous benefits for them, including tax preparation and financial planning services. In addition, our Co-Executive Chairmen are reimbursed by us for the use of a car and driver, and we pay for the compensation of certain personnel who administer personal matters for them. We believe that these benefits are appropriate in light of the time that they spend on our business, the limited compensation paid by us for their services and their unique status as Co-Founders of our firm.
Minimum Retained Ownership
While employed by us, unless waived in whole or in part, each of our named executive officers is required to hold at least 25% of the cumulative amount of KKR Holdings units and restricted holdings units that have satisfied the vesting conditions during the duration of his employment with the firm. In addition, unless waived in whole or in part, each of our named executive officers may be required, on a grant by grant basis, to hold shares of our common stock equivalents of 15% of the cumulative restricted stock units granted under our Equity Incentive Plans that have satisfied the applicable vesting condition during the duration of his employment with the firm. From time to time, the transfer restrictions and minimum retained ownership requirements applicable to restricted stock units of certain employees, including our named executive officers, have been and may be transferred to such employees' KKR Holdings units or restricted holdings units, if any, so that the total units or shares of equity subject to transfer restrictions and minimum retained ownership requirements are expected to be the same, unless waived.
Compensation and Risk
Our compensation program includes elements that we believe discourage excessive risk-taking and align the compensation of our employees with the long-term performance of the firm. For example, all compensation elements are allocated at the discretion of our firm or by our Co-Founders, a significant majority of the equity awards granted to our employees are subject to a multi-year vesting conditions, one- and two-year post-vesting transfer restriction periods and/or a minimum retained ownership requirement and subject to forfeiture in connection with the breach of certain restrictive covenant obligations. Because our equity awards typically have multi-year vesting provisions, the actual amount of compensation realized by the recipient will be tied to the long- term performance of our common stock. Pursuant to our internal policies, our employees are not permitted to buy or sell derivative securities, including for hedging purposes, or to engage in short-selling to hedge their economic risk of ownership. In addition, we only make cash payments of carried interest to our employees when profitable investments have been realized and after sufficient cash has been distributed to the investors in our funds. Moreover, the general partner of a fund is required to return carried interest distributions to the fund due to, for example, underperformance by the relevant fund subsequent to the payment of such carried interest. Accordingly, the employees would be subject to a "clawback," i.e., be required to return carried interest payments previously made, all of which further discourages excessive risk-taking by our personnel.
2021 Summary Compensation Table
The following table presents summary information concerning compensation that was paid for services rendered by our named executive officers during the fiscal years ended December 31, 2019, 2020 and 2021.
In 2019, 2020 and 2021, our named executive officers received distributions from KKR Holdings, as well as dividends on shares of common stock they hold. Because these distributions and dividends are not considered to be compensation, they are not reflected as compensation in the table below. There are certain contractual arrangements we entered into with KKR Holdings in October 2009 and thereafter, including a tax receivable agreement, which relate to payments to our named executive officers that are not compensatory and are described in "Certain Relationships and Related Transactions, and Director Independence."
Carried interest distributions to our named executive officers in respect of the carry pool for the years ended December 31, 2019, 2020 and 2021 are reflected in the All Other Compensation column in the table below.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | All Other Compensation ($) (2) | Total ($) | |||||||||||||||||||||||||||||||||||
| Henry R. Kravis | 2021 | 300,000 | — | — | 67,154,677 | (3) | 67,454,677 | ||||||||||||||||||||||||||||||||||
| Co-Executive Chairmen | 2020 | 75,000 | — | — | 41,936,119 | 42,011,119 | |||||||||||||||||||||||||||||||||||
| 2019 | 300,000 | — | — | 39,822,617 | 40,122,617 | ||||||||||||||||||||||||||||||||||||
| George R. Roberts | 2021 | 300,000 | — | — | 67,209,901 | (4) | 67,509,901 | ||||||||||||||||||||||||||||||||||
| Co-Executive Chairmen | 2020 | 75,000 | — | — | 41,937,533 | 42,012,533 | |||||||||||||||||||||||||||||||||||
| 2019 | 300,000 | — | — | 39,865,377 | 40,165,377 | ||||||||||||||||||||||||||||||||||||
| Joseph Y. Bae | 2021 | 300,000 | 24,700,000 | 476,261,500 | 58,374,648 | (5) | 559,636,148 | ||||||||||||||||||||||||||||||||||
| Co-Chief Executive Officer | 2020 | 75,000 | — | — | 35,729,288 | 35,804,288 | |||||||||||||||||||||||||||||||||||
| 2019 | 300,000 | 8,300,000 | — | 26,372,589 | 34,972,589 | ||||||||||||||||||||||||||||||||||||
| Scott C. Nuttall | 2021 | 300,000 | 24,700,000 | 442,161,500 | 55,980,932 | (6) | 523,142,432 | ||||||||||||||||||||||||||||||||||
| Co-Chief Executive Officer | 2020 | 75,000 | — | — | 36,123,519 | 36,198,519 | |||||||||||||||||||||||||||||||||||
| 2019 | 300,000 | 8,300,000 | — | 26,637,879 | 35,237,879 | ||||||||||||||||||||||||||||||||||||
| Robert H. Lewin (7) | 2021 | 300,000 | 6,450,000 | 30,690,000 | 8,585,091 | (8) | 46,025,091 | ||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2020 | 300,000 | 3,450,000 | — | 4,773,493 | 8,523,493 | |||||||||||||||||||||||||||||||||||
| David J. Sorkin | 2021 | 300,000 | 5,450,000 | 10,230,000 | 4,664,923 | (9) | 20,644,923 | ||||||||||||||||||||||||||||||||||
| General Counsel | 2020 | 300,000 | 3,550,000 | — | 3,318,106 | 7,168,106 | |||||||||||||||||||||||||||||||||||
| 2019 | 300,000 | 2,800,000 | — | 3,361,433 | 6,461,433 | ||||||||||||||||||||||||||||||||||||
| (1) | Stock awards reflected in the table above for each year presented represent the value of the restricted holdings units and KKR Holdings units granted in such reporting period. Fair value of the restricted holdings units and KKR Holdings units granted to our named executive officers are calculated in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation ("ASC Topic 718"). See Note 19 "Equity Based Compensation" to our consolidated financial statements included elsewhere in this Annual Report for additional information about the valuation assumptions with respect to all grants reflected in this column. These amounts reflect the aggregate grant date fair values calculated under ASC Topic 718, and may not correspond to the actual value that will be recognized by our named executive officers. | ||||||||||||||||||||||||||||||||||||||||
| (2) | Carried interest is presented on the basis of cash received by our named executive officers in the respective fiscal year. We believe that presenting actual cash received by our named executive officers is a more representative disclosure of their compensation than presenting accrued carried interest, because carried interest is paid only if and when there are profitable realization events relating to the underlying investments. Carried interest also includes amounts retained and allocated for distribution to the respective named executive officer, but not yet distributed to the named executive officer, which could be used to fund potential future clawback obligations if any were to arise. | ||||||||||||||||||||||||||||||||||||||||
| (3) | Consists of $66,277,829 in cash payments of carried interest from the carry pool during 2021. Also consists of the following payments made by KKR (unless otherwise noted): $192,946 related to the cost of Mr. Kravis' use of a car and driver during 2021; $598,902 related to certain personnel who administer personal matters for Mr. Kravis during 2021 (the entire cost of which is reported, because we do not separately track whether their time is spent for business or personal reasons); $25,000 related to financial planning services fees (incurred by KKR Holdings); $25,000 related to tax preparation fees; $25,000 of matching charitable donations; and up to $10,000 of other miscellaneous benefits. SEC rules require that transportation and other expenses not directly and integrally related to our business be disclosed as compensation to Mr. Kravis. KKR also paid certain amounts for the use for KKR business of aircraft owned by an entity controlled by Mr. Kravis as described in “Certain Relationships and Related Party Transactions, Director Independence – Firm Use of Private Aircraft”. From time to time, family members and other personal guests of Mr. Kravis may accompany him on such flights or otherwise on business travel, for which KKR incurs no incremental cost. | ||||||||||||||||||||||||||||||||||||||||
| (4) | Consists of $66,277,829 in cash payments of carried interest from the carry pool during 2021. Also consists of the following payments made by KKR (unless otherwise noted): $229,171 related to the cost of Mr. Roberts's use of a car and driver during 2021; $542,901 related to certain personnel who administer personal matters for Mr. Roberts during 2021 (the entire cost of which is reported, because we do not separately track whether their time is spent for business or personal reasons); $25,000 related to financial planning services fees (incurred by KKR Holdings); $25,000 related to tax preparation fees; $100,000 of matching charitable donations; and up to $10,000 of other miscellaneous benefits. SEC rules require that transportation and other expenses not directly and integrally related to our business be disclosed as compensation to Mr. Roberts. KKR also paid certain amounts for the use for KKR business of aircraft owned by an entity controlled by Mr. Roberts as described in “Certain Relationships and Related Party Transactions, Director Independence – Firm Use of Private Aircraft”. From time to time, family members and other personal guests of Mr. Roberts may accompany him on such flights, for which KKR incurs no incremental cost. | ||||||||||||||||||||||||||||||||||||||||
| (5) | Consists of $58,249,648 in cash payments of carried interest from the carry pool during 2021. Also consists of the following payments made by KKR (unless otherwise noted): $25,000 related to financial planning services fees (incurred by KKR Holdings); $25,000 related to tax preparation fees; and $75,000 of matching charitable donations. | ||||||||||||||||||||||||||||||||||||||||
| (6) | Consists of $55,550,432 in cash payments of carried interest from the carry pool during 2021; $192,000 in restricted stock units and $88,500 in deferred compensation notional units of Fiserv, Inc. for Mr. Nuttall's service as a KKR-designated director on the board of directors of Fiserv, Inc., a KKR portfolio company, during 2021. Also consists of the following payments made by KKR (unless otherwise noted): $25,000 related to financial planning services fees (incurred by KKR Holdings); $25,000 related to tax preparation fees; and $100,000 of matching charitable donations. | ||||||||||||||||||||||||||||||||||||||||
| (7) | Mr. Lewin became one of our named executive officers in 2020, and therefore, only his compensation information for the fiscal years ended December 31, 2021 and 2020 is provided in the table. | ||||||||||||||||||||||||||||||||||||||||
| (8) | Consists of $8,435,091 in cash payments of carried interest from the carry pool during 2021. Also consists of the following payments made by KKR (unless otherwise noted): $25,000 related to financial planning services fees (incurred by KKR Holdings); $25,000 related to tax preparation fees; and $100,000 of matching charitable donations. | ||||||||||||||||||||||||||||||||||||||||
| (9) | Consists of $4,514,923 in cash payments of carried interest from the carry pool during 2021. Also consists of the following payments made by KKR (unless otherwise noted): $25,000 related to financial planning services fees (incurred by KKR Holdings); $25,000 related to tax preparation fees; and $100,000 of matching charitable donations. |
Grants of Plan Based Awards in 2021
The following table provides supplemental information relating to grants of equity awards in the year ended December 31, 2021 provided in our 2021 Summary Compensation Table.
| Estimated Future Payouts Under Equity Incentive Plan Awards**(1)** | All Other Stock Awards: Number of Shares of Stock or Units (#) | ||||||||||||||||||||||
| Name | Grant Date | Threshold (#) | Target (#) | Maximum (#) | Grant Date Fair Value of Stock and Options Awards ($) (4) | ||||||||||||||||||
| Henry R. Kravis | — | — | — | — | — | — | |||||||||||||||||
| George R. Roberts | — | — | — | — | — | — | |||||||||||||||||
| Joseph Y. Bae | 02/18/2021 | 166,666(2) | — | 1,000,000 | — | $ | 34,100,000 | ||||||||||||||||
| 10/8/2021 | — | — | — | 1,150,000 | (3) | $ | 75,336,500 | ||||||||||||||||
| 12/09/2021 | 1,500,000(2) | — | 7,500,000 | — | $ | 366,825,000 | |||||||||||||||||
| Scott C. Nuttall | 10/8/2021 | — | — | — | 1,150,000 | (3) | $ | 75,336,500 | |||||||||||||||
| 12/09/2021 | 1,500,000(2) | — | 7,500,000 | — | $ | 366,825,000 | |||||||||||||||||
| Robert H. Lewin | 02/18/2021 | 150,000(2) | — | 900,000 | — | $ | 30,690,000 | ||||||||||||||||
| David J. Sorkin | 02/18/2021 | 50,000(2) | — | 300,000 | — | $ | 10,230,000 | ||||||||||||||||
(1)The amounts represent restricted holdings units granted under our 2019 Equity Incentive Plan in the fiscal year ended December 31, 2021. Each grant of restricted holdings units is subject to market price vesting requirements and a service-based vesting condition, which are described under the captions "Compensation Elements: Incentive Equity Awards" above and "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards-Terms of Restricted Holdings Units" below.
(2)16.7% of each award granted in February 2021 is eligible to vest at the threshold market price of $45.00 to $70.00 and 20% of each award granted in December 2021 is eligible to vest at the threshold market price of $95.80 to $135.80.
(3)The amounts represent KKR Holdings units allocated in the fiscal year ended December 31, 2021. KKR Holdings units are described under the caption “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards-Terms of KKR Holdings Units” below.
(4)The amounts represent the grant date fair value of the KKR Holdings units or restricted holdings units, as applicable, as calculated in accordance with ASC Topic 718. See Note 19 "Equity Based Compensation" to our consolidated financial statements included elsewhere in this Annual Report for additional information about the valuation assumptions with respect to all grants reflected in this table. These amounts reflect the aggregate grant date fair values calculated under ASC Topic 718 and may not correspond to the actual value that will be recognized by our named executive officers.
Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards
Terms of KKR Holdings Units
In general, KKR Holdings units vest over a period of time from their grant date, subject to continued service through each vesting date. Following this service-based vesting, certain KKR Holdings units may also be subject to transfer restrictions and/or minimum retained ownership requirements. Unvested KKR Holdings units are not entitled to receive any distributions that are declared and received on the underlying KKR Group Partnership Units.
KKR Holdings units that are subject to transfer restrictions, unless waived, may not be sold, exchanged or otherwise transferred for a specified period of time following the initial vesting date and interests in such units will remain contingently vested during that time. The transfer restriction period typically lasts for (1) one year with respect to one-half of the units vesting on the vesting date and (2) two years with respect to the other one-half of the units vesting on such vesting date. Transfer restricted units become fully vested and transferable and may be exchanged into shares of common stock at the end of the transfer restriction period if the holder is not terminated for cause and has complied with the terms of his or her confidentiality and restrictive covenant agreement during the transfer restrictions period. See "Terms of Confidentiality and Restrictive Covenant Agreements" below.
Because KKR Holdings is a partnership, all of the outstanding KKR Holdings units have been legally allocated, but the allocation of 1,066,497 of these units has not been communicated as of December 31, 2021. Messrs. Kravis and Roberts are
authorized to allocate these KKR Holdings units, in their sole discretion, to themselves or others, on such terms as they determine, prior to the closing of the mergers contemplated by the Reorganization Agreement. For more information about the Reorganization Agreement, see “Certain Relationships and Related Transactions, and Director Independence—Reorganization Agreement” in this Annual Report.
While employed by our firm, our principals, including our named executive officers, are also subject to minimum retained ownership rules that require them to continuously hold at least 25% of their cumulatively vested KKR Holdings units, unless waived. The transfer and vesting restrictions and minimum retained ownership requirements applicable to KKR Holdings units may not be enforceable in all cases and can be waived, modified or amended by KKR Holdings at any time without our consent.
The terms of the KKR Holdings units described above are distinct from equity awards issuable under our Equity Incentive Plans, which are described below.
Terms of Restricted Stock Units
Restricted stock units are equity awards issuable under our 2019 Equity Incentive Plan, which after vesting, may be settled for shares of our common stock on a one-for-one basis (or an amount of cash equal to the fair market value of such shares).
In general, restricted stock units are subject to either (i) a service-based vesting condition with vesting in annual installments over a multi‑year period (generally three to five years) from a specified date, subject to the recipient's continued employment with us on the applicable vesting dates, subject to exceptions, or (ii) a market price-based vesting condition where the portion of the units that satisfies stock price target requirements will vest on a scheduled vesting date (generally five years from the grant date), subject to the recipient's continued employment with us on the scheduled vesting date, subject to exceptions. Following vesting, certain restricted stock unit grant agreements may also subject the shares of common stock delivered upon settlement of such restricted stock units to transfer restrictions and/or minimum retained ownership requirements. Unvested restricted stock units granted under our Equity Incentive Plans are not entitled to receive dividends from us. Certain restricted stock unit grant agreements may also contain additional vesting requirements.
Shares of common stock delivered upon settlement of restricted stock units that are subject to transfer restrictions, unless waived, may not be sold, exchanged or otherwise transferred for a specified period of time following the vesting date. The transfer restriction period typically lasts for (1) one year with respect to one-half of the units vesting on such vesting date and (2) two years with respect to the other one-half of the units vesting on such vesting date. Transfer-restricted shares of common stock become saleable at the end of the transfer restriction period if the holder has not been terminated for cause and has not breached in any significant or intentional manner, as determined by the Administrator (as defined in "KKR & Co. Inc. Equity Incentive Plan—Administration"), the terms of his or her confidentiality and restrictive covenants contained in the grant agreement during the transfer restriction period. See "Terms of Confidentiality and Restrictive Covenant Agreements" below.
While employed by our firm, our employees, including our named executive officers, may also be subject to a minimum retained ownership requirement under the restricted stock unit grant agreement, which would obligate them to continuously hold shares of our common stock equivalents of 15% of their cumulatively vested restricted stock units, unless waived. From time to time, the transfer restrictions and minimum retained ownership requirements applicable to restricted stock units of certain employees, including our named executive officers, have been and may be transferred to such employees' KKR Holdings units or restricted holdings units, if any, so that the total units or shares of equity subject to transfer restrictions and minimum retained ownership requirements are expected to be the same, unless waived.
Terms of Restricted Holdings Units
In February 2020, we adopted a new form of equity award under the 2019 Equity Incentive Plan called restricted holdings units. Restricted holdings units are granted under the 2019 Equity Incentive Plan, and the number of shares of common stock in respect of such awards is subject to the overall limitation on the number of shares of common stock that may be awarded under the 2019 Equity Incentive Plan. The overall restricted holdings units program was approved by a committee of independent directors of our board of directors. KKR's independent directors are ineligible to receive restricted holdings units.
In general, restricted holdings units are subject to vesting conditions similar to those of restricted stock units described above. Restricted holdings units provide the holder the ability, after vesting and the satisfaction of certain other conditions, to exchange them for shares of our common stock on a one-for-one basis (or at the discretion of KKR, cash in an amount equal to the fair market value of the shares of common stock that would otherwise be deliverable in such exchange). There is no tax receivable agreement in place for such exchange of restricted holdings units granted under the 2019 Equity Incentive Plan, and
therefore we will receive 100% of any tax benefits arising from the exchange of restricted holdings units granted under that plan. Prior to vesting, restricted holdings units are not entitled to any distributions from us.
Following vesting, restricted holdings units are generally subject to additional restrictions, including transfer restrictions, which typically lasts for (1) one year with respect to one-half of the units vesting on such vesting date and (2) two years with respect to the other one-half of the units vesting on such vesting date, and minimum retained ownership requirements, which obligate the recipients to continuously hold at least 25% of their cumulatively vested restricted holdings units, unless waived. Transfer restricted units become fully vested and transferable and may be exchanged into shares of common stock at the end of the transfer restriction period if the holder is not terminated for cause and has complied with the terms of his or her confidentiality and restrictive covenant agreement during the transfer restrictions period. See "Terms of Confidentiality and Restrictive Covenant Agreements" below.
Terms of Confidentiality and Restrictive Covenant Agreements
The confidentiality and restrictive covenant agreements with each of our named executive officers include prohibitions on them competing with us or soliciting our fund investors, clients or employees while employed by us and during a restricted period following their departure from the firm. These agreements also have non-disparagement obligations and require them to protect and use the firm's confidential information only in accordance with confidentiality restrictions set forth in the agreement.
The restricted periods for our Co‑Executive Chairmen expire two years from termination for both the prohibitions on competition with us and the prohibitions on the solicitation of our fund investors, clients and employees. In cases where the Co-Executive Chairman is terminated involuntarily and for reasons not constituting cause, such periods are reduced to one year from termination. The restricted periods for our other named executive officers expire (1) in the case of the prohibitions on competition with us, 12 months from termination and (2) in the case of the prohibitions on the solicitation of our fund investors, clients, and employees, 15 months from termination. These agreements also require that we, and our Co-Executive Chairmen and other named executive officers, provide advance notice prior to termination of employment.
Our named executive officers (other than our Co‑Executive Chairmen) have entered into these confidentiality and restrictive covenant agreements with us through their restricted stock unit grant agreements or restricted holdings unit grant agreements and separately also with KKR Holdings, which is entitled to waive, modify or amend them at any time without our consent (prior to the closing of the mergers contemplated by the Reorganization Agreement). However, because our Co‑Executive Chairmen have not received any restricted stock units or restricted holdings units from us, their confidentiality and restrictive covenant agreements are solely with KKR Holdings. Because KKR Holdings is the party to these agreements and not us, we may not be able to enforce them, and these agreements might be waived, modified or amended at any time without our consent (prior to the closing of the mergers contemplated by the Reorganization Agreement).
Outstanding Equity Awards at 2021 Fiscal Year‑End
The following table sets forth information concerning unvested restricted stock units, restricted holdings units and KKR Holdings units for each of the named executive officers as of December 31, 2021.
| Stock Awards | |||||||||||||||||
| Name | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) (1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) | |||||||||||||
| Henry R. Kravis | 500,000 (2) | $ | 37,250,000 | — | — | ||||||||||||
| George R. Roberts | 500,000 (2) | $ | 37,250,000 | — | — | ||||||||||||
| Joseph Y. Bae | 2,905,000 (3) | $ | 216,422,500 | 7,500,000 (5) | $ | 558,750,000 | |||||||||||
| Scott C. Nuttall | 1,905,000 (4) | $ | 141,922,500 | 7,500,000 (6) | $ | 558,750,000 | |||||||||||
| Robert H. Lewin | 900,000 (7) | $ | 67,050,000 | — | — | ||||||||||||
| David J. Sorkin | 300,000 (8) | $ | 22,350,000 | — | — | ||||||||||||
(1) These amounts are based on the closing market price of our common stock on the last trading day of the year ended December 31, 2021, which was $74.50 per share.
(2) Includes 500,000 KKR Holdings units granted to each of Messrs. Kravis and Roberts on November 2, 2017, which will vest on the earlier of October 1, 2022 and immediately prior to the closing of the mergers under the Reorganization Agreement.
(3) Includes (i) 1,455,000 KKR Holdings units granted on November 2, 2017, which will vest on the earlier of October 1, 2022 and immediately prior to the closing of the mergers under the Reorganization Agreement; (ii) 450,000 restricted stock units granted on November 2, 2017, which will vest on October 1, 2022; and (iii) 1,000,000 restricted holdings units granted on February 18, 2021 ("2021 Grant"), which will vest upon the average closing price of our common stock during 20 consecutive trading days meeting or exceeding certain specified stock price targets between $45.00 and $70.00 per share, all of which have been achieved by December 31, 2021. These 2021 Grant restricted holdings units will vest on May 1, 2026 if the named executive officer continues to serve as an employee until that date, subject to certain exceptions. Does not include 1,150,000 KKR Holdings Units allocated to the named executive officer on October 8, 2021, of which 30% is subject to forfeiture if such executive is not employed by KKR on October 1, 2022, subject to certain exceptions.
(4) Includes (i) 1,455,000 KKR Holdings units granted on November 2, 2017, which will vest on the earlier of October 1, 2022 and immediately prior to the closing of the mergers under the Reorganization Agreement; and (ii) 450,000 restricted stock units granted on November 2, 2017, which will vest on October 1, 2022. Does not include 1,150,000 KKR Holdings Units allocated to the named executive officer on October 8, 2021, of which 30% is subject to forfeiture if such executive is not employed by KKR on October 1, 2022, subject to certain exceptions.
(5) Represents 7,500,000 restricted holdings units granted on December 9, 2021, which will vest upon the average closing price of our common stock during 20 consecutive trading days meeting or exceeding specified stock price targets ranging from $95.80 to $135.80. Restricted holdings units that satisfy this market price vesting condition are eligible to vest beginning on December 31, 2026, if the named executive officer continues to serve as an employee until that date, subject to certain exceptions, and will expire if not vested on or prior to December 31, 2028.
(6) Represents 7,500,000 restricted holdings units granted on December 9, 2021, which will vest upon the average closing price of our common stock during 20 consecutive trading days meeting or exceeding specified stock price targets ranging from $95.80 to $135.80. Restricted holdings units that satisfy this market price vesting condition are eligible to vest beginning on December 31, 2026, if the named executive officer continues to serve as an employee until that date, subject to certain exceptions, and will expire if not vested on or prior to December 31, 2028.
(7) Represents 900,000 restricted holdings units granted on February 18, 2021, which will vest upon the average closing price of our common stock during 20 consecutive trading days meeting or exceeding certain specified stock price targets between $45.00 and $70.00 per share, all of which have been achieved by December 31, 2021. These restricted holdings units will vest on May 1, 2026 if the named executive officer continues to serve as an employee until that date, subject to certain exceptions.
(8) Represents 300,000 restricted holdings units granted on February 18, 2021, which will vest upon the average closing price of our common stock during 20 consecutive trading days meeting or exceeding certain specified stock price targets between $45.00 and $70.00 per share, all of which have been achieved by December 31, 2021. These restricted holdings units will vest on May 1, 2026 if the named executive officer continues to serve as an employee until that date, subject to certain exceptions.
Option Exercises and Stock Vested in 2021
The following table sets forth information concerning the vesting of KKR Holdings units and restricted stock units held by each of our named executive officers during the year ended December 31, 2021.
| Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) (2) | |||||||||||||||||||||||||||||||||
| Henry R. Kravis | 500,000 | $ | 30,840,000 | ||||||||||||||||||||||||||||||||
| George R. Roberts | 500,000 | $ | 30,840,000 | ||||||||||||||||||||||||||||||||
| Joseph Y. Bae | 5,592,848 | $ | 295,615,072 | ||||||||||||||||||||||||||||||||
| Scott C. Nuttall | 5,652,848 | $ | 299,009,872 | ||||||||||||||||||||||||||||||||
| Robert H. Lewin | 153,934 | $ | 8,591,627 | ||||||||||||||||||||||||||||||||
| David J. Sorkin | 130,420 | $ | 7,251,947 | ||||||||||||||||||||||||||||||||
(1) The amounts reflected in this column represent KKR Holdings units and shares of common stock delivered upon vesting, a portion of which are subject to one‑ and two-year transfer restrictions upon vesting. See "—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of KKR Holdings Units" and "—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of Restricted Stock Units" for additional terms, including with respect to the transfer of certain restrictions from the restricted stock units to employees' KKR Holdings units.
(2) These amounts are based on the closing market price of our common stock on each respective vesting date.
Pension Benefits for 2021
We provided no pension benefits during the fiscal year ended December 31, 2021.
Nonqualified Deferred Compensation for 2021
We provided no defined contribution plan for the deferral of compensation on a basis that is not tax‑qualified during the fiscal year ended December 31, 2021.
Potential Payments Upon Termination or Change in Control
Upon termination of employment (other than due to death or permanent disability), vesting generally ceases for KKR Holdings units, restricted holdings units and restricted stock units that have not vested. In addition, transfer-restricted vested KKR Holdings units, transfer-restricted vested restricted holdings units and, if applicable, transfer-restricted restricted stock units (which term includes the transfer-restricted shares of common stock that may be delivered upon settlement of such restricted stock units) remain subject to transfer restrictions for one- and two-year periods, except as described below. See "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for additional information regarding the KKR Holdings units and common stock held by our named executive officers.
Other than the restricted holdings units awarded to the Co-Chief Executive Officers on December 8, 2021 ("Co-CEO Awards"), a named executive officer who retires after the first date on which his or her age plus years of service to KKR equals 80 ("qualified retirement") will generally (i) vest in his or her unvested KKR Holdings units, restricted stock units and restricted holdings units (for those with service based vesting conditions) that would otherwise vest within two years following retirement and (ii) vest in a pro rata portion of his or her unvested restricted stock units and restricted holdings units (for those with market price based vesting conditions) that satisfied the stock price target requirements at the time of qualified retirement, in each case, subject to compliance, if applicable, with the requirement that the holder not violate the terms and conditions of his or her confidentiality and restrictive covenants during the period in which such KKR Holdings unit, restricted stock unit or restricted holdings units, if applicable, remains transfer restricted over the one- and two-year periods from the original vesting date. The Co-CEO Awards do not vest upon qualified retirement.
Upon death or permanent disability, generally (i) a holder of KKR Holdings units, restricted stock units and restricted holdings units (for those with service based vesting conditions) will become vested with respect to service based vesting conditions in all unvested KKR Holdings units, restricted stock units and restricted holdings units, respectively, and (ii) a holder of restricted stock units and restricted holdings units (for those with market price based conditions) will be eligible to vest in a pro rata portion of his or her unvested restricted stock units and restricted holdings units that satisfy the stock price target requirements at a prescribed time, which include the time of death or permanent disability or at the end of the service based
vesting requirement. Upon vesting, KKR Holdings units and restricted holdings units will become permitted to be exchanged into shares of common stock after the applicable transfer restrictions following vesting have lapsed. Restricted stock units will be settled on, or as soon as practicable after, the scheduled vesting dates, and, if applicable, subject to transfer restrictions. In addition, upon a change in control of KKR, a holder of KKR Holdings units, restricted stock units and restricted holdings units may become immediately vested in all unvested KKR Holdings units, restricted stock units and restricted holdings units, respectively. The values of unvested KKR Holdings units, restricted stock units and restricted holding units held by the named executive officers as of December 31, 2021 are set forth above in "Outstanding Equity Awards at 2021 Fiscal Year-End."
Upon termination of employment, vesting generally ceases for carried interest allocations, some of which are subject to forfeiture for breach of the confidentiality and restrictive covenant agreement. In addition, carried interest allocations generally become immediately vested upon death or disability, and certain carried interest allocations permit additional vesting upon retirement.
Pay Ratio Disclosure
For the fiscal year ended December 31, 2021:
-
the median of the annual total compensation of all employees of our company (other than Messrs. Bae and Nuttall, who are our Co-Chief Executive Officers as of December 31, 2021) was $320,000;
-
the annual total compensation of Messrs. Bae and Nuttall were $559,636,148 and $523,142,432, respectively; and
-
the ratio of the averaged annual total compensation of our Co-Chief Executive Officers to the median of the annual total compensation of all other employees was 1,692 to 1.
To identify the median employee for the purpose of providing the information above, we examined the compensation of all our current employees (other than our Co-Chief Executive Officers) as of December 31, 2021, using, based on our payroll records, a consistently applied compensation measure consisting of such employees' annual salary, annual cash bonus, actual overtime, carried interest payouts and equity granted. Employees on unpaid leave of absence, employees who gave notice of departure and were not part of the regular year-end compensation process, and any employee who joined us in connection with an acquisition consummated during the year (including the acquisition of Global Atlantic) were excluded from the calculation. Compensation of employees who were employed for less than the full year of 2021 were annualized only if they were part of the regular year-end compensation process. We reviewed all compensation in U.S. dollars, using the relevant exchange rate for any compensation paid in other currencies. After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our principal executive officers as set forth in "—Summary Compensation Table—2021 Summary Compensation Table." As noted in “Compensation Discussion and Analysis," distributions from KKR Holdings and dividends paid on shares of common stock are not considered compensation and accordingly are not included in the pay ratio calculation above.
Director Compensation
We limit compensation for service on our board of directors to the independent directors. During 2021, each independent director received (1) an annual cash retainer of $90,000, which was increased to $110,000 annually beginning December 9, 2021, (2) an additional annual cash retainer of $15,000 if such independent director is a member of the nominating and corporate governance committee, (3) an additional annual cash retainer of $25,000 if such independent director is a member of the audit committee and an additional annual cash retainer of $25,000 (in addition to the annual cash retainer as a member of the audit committee) if such independent director serves as the chairman of the audit committee, and (4) an additional annual cash retainer of $10,000 if such independent director is a member of the conflicts committee and an additional annual cash retainer of $15,000 (in addition to the annual cash retainer as a member of the conflicts committee) if such independent director serves as the chairman of the conflicts committee. Cash retainers are pro-rated if, during the fiscal year, a director joins or resigns from the board of directors, a director joins or resigns from a committee or the amount of a retainer is increased or decreased. In addition, on December 9, 2021, restricted stock units were granted to each independent director pursuant to our 2019 Equity Incentive Plan. Because Mr. Hernández, Mr. Holmes, Ms. Brown and Mr. Cohler, all independent directors, joined our board of directors on March 4, 2021, March 4, 2021, June 16, 2021 and December 31, 2021, respectively, an additional 1,900, 1,900, 785 and 2,330 restricted stock units, respectively, were granted to them.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | ||||||||
| Adriane M. Brown | 49,959 | 231,328 | 281,287 | ||||||||
| Matthew R. Cohler (2) | — | 172,513 | 172,513 | ||||||||
| Mary N. Dillon | 101,260 | 186,669 | 287,929 | ||||||||
| Joseph A. Grundfest | 141,260 | 186,669 | 327,929 | ||||||||
| Arturo Gutiérrez Hernández | 76,260 | 274,829 | 351,089 | ||||||||
| John B. Hess | 91,260 | 186,669 | 277,929 | ||||||||
| Dane E. Holmes | 76,260 | 274,829 | 351,089 | ||||||||
| Xavier B. Niel | 91,260 | 186,669 | 277,929 | ||||||||
| Patricia F. Russo | 101,260 | 186,669 | 287,929 | ||||||||
| Thomas M. Schoewe | 126,260 | 186,669 | 312,929 | ||||||||
| Robert W. Scully | 156,260 | 186,669 | 342,929 | ||||||||
| Evan T. Spiegel | 21,422 | 186,669 | 208,091 | ||||||||
(1) Represents the aggregate grant date fair value of restricted stock units granted to each of the independent directors during the year ended December 31, 2021 as calculated in accordance with ASC Topic 718. See Note 19 "Equity Based Compensation" to our consolidated financial statements included elsewhere in this Annual Report for additional information about the valuation assumptions with respect to all grants reflected in this column. These amounts reflect the aggregate grant date fair values calculated under ASC Topic 718 and may not correspond to the actual value that will be recognized by the independent directors.
(2) Mr. Cohler was appointed to our board of directors on December 31, 2021.
The following table details grants of restricted stock units to each independent director in the year ended December 31, 2021. The table includes the grant date and grant date fair value of 2021 restricted stock units and the aggregate number of unvested restricted stock units as of December 31, 2021 owned by each independent director who served as a director during the year ended December 31, 2021:
| Name | Grant Date (1) | Stock Awards (#) | Grant Date Fair Value ($) (2) | Total Number of Unvested Stock Awards on December 31, 2021 (#) | ||||||||||
| Adriane M. Brown | 6/16/2021 | 785 | 44,659 | — | ||||||||||
| 12/9/2021 | 2,479 | 186,669 | 2,479 | |||||||||||
| Matthew R. Cohler (3) | 12/31/2021 | 2,330 | 172,513 | 2,330 | ||||||||||
| Mary N. Dillon | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Joseph A. Grundfest | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Arturo Gutiérrez Hernández | 3/4/2021 | 1,900 | 88,160 | — |
| 12/9/2021 | 2,479 | 186,669 | 2,479 | |||||||||||
| John B. Hess | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Dane E. Holmes | 3/4/2021 | 1,900 | 88,160 | — | ||||||||||
| 12/9/2021 | 2,479 | 186,669 | 2,479 | |||||||||||
| Xavier B. Niel | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Patricia F. Russo | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Thomas M. Schoewe | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Robert W. Scully | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
| Evan T. Spiegel | 12/9/2021 | 2,479 | 186,669 | 2,479 | ||||||||||
(1) The restricted stock units were granted on December 9. 2021 and will vest on October 1, 2022, subject to the grantee's continued service through the vesting date. An additional 1,900, 1,900 and 785 restricted stock units granted to Mr. Hernández, Mr. Holmes and Ms. Brown, respectively, for joining the board of directors on March 4, 2021, March 4, 2021 and June 16, 2021, respectively, vested and were settled into an equal number of shares of KKR common stock on October 1, 2021. 2,330 restricted stock units were granted to Mr. Cohler for joining the board of directors on December 31, 2021 and will vest on October 1, 2022, subject to the grantee's continued service through the vesting date.
(2) This column represents the grant date fair value of restricted stock units granted to each of the independent directors during the year ended December 31, 2021 as calculated in accordance with ASC Topic 718. These amounts reflect the aggregate grant date fair values calculated under ASC Topic 718 and may not correspond to the actual value that will be recognized by the independent directors.
(3) Mr. Cohler was appointed to our board of directors on December 31, 2021.
KKR & Co. Inc. Equity Incentive Plan
Our outstanding equity awards were granted under the Amended and Restated KKR & Co. Inc. 2010 Equity Incentive Plan, which we refer to as our 2010 Equity Incentive Plan, or the Amended and Restated KKR & Co. Inc. 2019 Equity Incentive Plan, which we refer to as our 2019 Equity Incentive Plan. Following the effectiveness of our 2019 Equity Incentive Plan on March 29, 2019, we do not make any further grants under our 2010 Equity Incentive Plan, and our 2019 Equity Incentive Plan became our only plan for providing new equity-based awards. Our 2019 Equity Incentive Plan has a term of 10 years from the effective date. Outstanding awards under our 2010 Equity Incentive Plan remain outstanding, unchanged and subject to the terms of our 2010 Equity Incentive Plan and their respective equity award agreements, until the vesting, expiration or lapse of such awards in accordance with their terms.
Administration
Our board of directors or a committee or subcommittee thereof administers or will administer, as applicable, our Equity Incentive Plans (the "Administrator"). The Administrator has the authority to make all decisions, determinations and interpretations with respect to the administration of our Equity Incentive Plans, including determining who will receive awards thereunder, the number of shares of common stock underlying the awards and the terms and conditions of the awards, and is permitted, subject to applicable law, to delegate all or any part of its responsibilities and powers to any employee or employees selected by it in accordance with the terms of the plan. The board of directors authorized its executive committee (consisting of Messrs. Kravis and Roberts) to act as the Administrator under each plan, provided that (i) the Executive Committee is not authorized to make grants with respect to the executive officers without approval of the board of directors and (ii) the board of directors reserved the power and authority to act as the Administrator and to modify the power and authority of the Executive Committee under each plan.
Common Stock Subject to the Plan
As of December 31, 2021, 70,812,698 shares of common stock were available for issuance in respect of outstanding awards and the grant of future awards, representing 15% of the aggregate number of aggregate number of the shares of common stock and KKR Group Partnership Units (excluding KKR Group Partnership Units held by KKR & Co. Inc. or its wholly-owned subsidiaries) (which is referred to as "Diluted Common Shares" in this report) outstanding at the close of business on December 31, 2021, minus the number of shares underlying any outstanding equity awards granted under our 2019 Equity Incentive Plan that have not yet been delivered upon vesting. Under the 2019 Equity Incentive Plan, the aggregate number of shares of common stock available under the plan will be increased, on the first day of each fiscal year, by a number of shares of common stock equal to the positive difference, if any, between (x) 15% of the number of Diluted Class A Shares outstanding at the close of business on the last day of the immediately preceding fiscal year minus (y) the number of shares of common stock available for issuance in respect of outstanding awards and the grant of future awards, in each case, under our 2019 Equity
Incentive Plan as of the last day of such year, unless the Administrator in its sole discretion should decide to increase the number of shares of common stock available under the plan by a lesser amount on any such date. As a result, on the first day of each fiscal year, the number of shares of common stock available for issuance of future awards under our 2019 Equity Incentive Plan will be adjusted upwards to 15% of the number of Diluted Common Shares outstanding at the close of business on the last day of the immediately preceding fiscal year, minus the number of shares underlying any outstanding equity awards granted under our 2019 Equity Incentive Plan that have not yet been delivered upon vesting. Therefore, we expect that the number of shares of common stock available for issuance of future awards under our 2019 Equity Incentive Plan will increase at the beginning of each fiscal year compared to the end of the immediately preceding fiscal year if, during the immediately preceding year, there has been (i) any increase in the aggregate number of shares of common stock and KKR Group Partnership Units outstanding or (ii) any delivery of underlying shares upon vesting of outstanding equity awards under our 2019 Equity Incentive Plan.
Restricted Stock Units and Other Equity-Based Awards
The Administrator may grant or sell awards of restricted stock units, restricted holdings units, common stock, restricted common stock, deferred restricted common stock, phantom restricted common stock, or any other awards that are valued in whole or in part by reference to, or are otherwise based on the fair market value of, our common stock. Any of these or other equity-based awards may be in such form, and dependent on such conditions, as the Administrator determines, including the right to receive, or vest with respect to, one or more shares of common stock (or the equivalent cash value of such shares) upon the completion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives. The Administrator may determine whether any such equity-based awards will be payable in cash, shares of common stock or other assets or a combination of cash, common stock and other assets.
Options and Stock Appreciation Rights
The Administrator may award non-qualified stock options and stock appreciation rights. Options and stock appreciation rights granted under the 2019 Equity Incentive Plan will become vested and exercisable at such times and upon such terms and conditions as may be determined by the Administrator at the time of grant, but no option or stock appreciation right will be exercisable for a period of more than ten years after it is granted. The exercise price per share will be determined by the Administrator, provided that options and stock appreciation rights granted to participants who are U.S. taxpayers will not be granted with an exercise price less than 100% of the fair market value per share of common stock on the date of grant. To the extent permitted by the Administrator, the exercise price of an option may be paid in cash or its equivalent, in shares of common stock having a fair market value equal to the aggregate exercise price and satisfying such other requirements as may be imposed by the Administrator, partly in cash and partly in shares of common stock or net settlement in shares of common stock. As determined by the Administrator, stock appreciation rights may be settled in shares of common stock, cash or any combination thereof.
Compensation Committee Interlocks and Insider Participation
Because we are a "controlled company" within the meaning of the corporate governance standards of the NYSE, our board of directors is not required by NYSE rules to establish a compensation committee. Messrs. Kravis and Roberts, our Co-Executive Chairmen, participated in discussions regarding executive compensation, and Messrs. Bae and Nuttall, our Co-Chief Executive Officers, participated in discussions regarding the compensation of our other executive officers. For a description of certain transactions between us and our executive officers, see "Certain Relationships and Related Transactions, and Director Independence."
Compensation Committee Report
Our board of directors does not have a compensation committee. The entire board of directors has reviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussion, has determined that the Compensation Discussion and Analysis should be included in this Annual Report.
| Henry R. Kravis | |||||
| George R. Roberts | |||||
| Joseph Y. Bae | |||||
| Scott C. Nuttall | |||||
| Adriane M. Brown | |||||
| Matthew R. Cohler | |||||
| Mary N. Dillon | |||||
| Joseph A. Grundfest | |||||
| Arturo Gutiérrez Hernández | |||||
| John B. Hess | |||||
| Dane E. Holmes | |||||
| Xavier B. Niel | |||||
| Patricia F. Russo | |||||
| Thomas M. Schoewe | |||||
| Robert W. Scully | |||||
| Evan T. Spiegel |
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