Carlyle to Pay Cavanagh $7 Million a Year as Co-President

Carlyle Group LP (CG) said it will pay JPMorgan Chase & Co. (JPM) executive Mike Cavanagh $7 million a year for his first three years as co-president of the private-equity firm.

Cavanagh will also receive restricted shares valued at $32 million to compensate for JPMorgan stock he gave up, as well as a stake in Carlyle’s future investment profits, known as carried interest, the Washington-based firm said today in a regulatory filing. Cavanagh, 48, made about $17 million for his 2013 service at JPMorgan, according to a person with direct knowledge of the awards.

Carlyle, the second-biggest manager of alternative assets such as private-equity funds and real estate, this week named Cavanagh co-president and co-chief operating officer alongside Glenn Youngkin, a 19-year veteran of the firm. The move is a loss for New York-based JPMorgan, where Cavanagh was a close deputy of Chief Executive Officer Jamie Dimon and considered a potential successor at the largest U.S. bank.

Top private-equity executives often earn more on dividends from their stock ownership than in compensation. Carlyle’s founders shared $279 million in 2013, with more than 99 percent of it in stock dividends, according to the firm’s annual report filed with U.S. regulators last month. Youngkin, 47, took home $22 million last year, with $11.5 million of it in dividends on his common stock and partnership shares, the filing shows.

Carried Interest

Cavanagh, who will start at Carlyle later this year, will get a $275,000 annual salary at Carlyle, as well as a minimum bonus of $2.725 million, a signing bonus of $2 million and $2 million in restricted stock for each of the first three years. Carlyle will also grant Cavanagh 933,416 restricted shares. The stock closed at $34.30 today.

The firm, founded in 1987 by Bill Conway, Dan D’Aniello and David Rubenstein, said it’s creating a long-term incentive program for Cavanagh, Youngkin and Adena Friedman, the chief financial officer. The plan will let them participate in the firm’s carried interest, to motivate them to stay at the firm and increase deal gains, Carlyle said in the filing.

Cavanagh’s compensation at JPMorgan last year included about $10 million in stock, a salary of $750,000 and the remainder in cash bonuses, said the person, who requested anonymity because the numbers weren’t disclosed.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Josh Friedman

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