Michael Arougheti

About Michael Arougheti

Michael J Arougheti is Executive Vice President and an “interested” director of Ares Capital Corporation (ARCC). He has served as a director since 2009, previously as Co‑Chairperson (2014–2024), CEO (2013–2014), and President (2004–2013); he is Co‑Founder, CEO, and a Director of Ares Management Corporation, with prior roles at RBC Capital Partners, Indosuez Capital, and Kidder, Peabody. He holds a B.A. in Ethics, Politics and Economics from Yale University . As a leader, he helped drive ARCC’s accretive 2010 Allied Capital acquisition; NAV rose from $11.21 (6/30/2009) to $14.11 (6/30/2010), including a $1.11/share gain from the deal, and ARCC’s one‑year total stockholder return outperformed every other BDC >$500mm during that period .

Past Roles

External Roles

Fixed Compensation

• ARCC pays no direct compensation to executive officers (including Arougheti); services are provided by the investment adviser and administrator under ARCC’s advisory and administration agreements .
• Portfolio managers (including Michael J Arougheti) receive a compensation package from Ares that includes fixed draw and variable incentive compensation based on ARCC performance; none receive direct compensation from ARCC .

Performance Compensation

• Variable incentive compensation for Ares personnel tied to ARCC performance (design feature disclosed); specific metric weights/targets/payouts for Arougheti are not disclosed by ARCC because he is compensated by Ares, not ARCC .
• ARCC has adopted a clawback policy compliant with Nasdaq Section 10D; it applies to incentive‑based compensation received from ARCC by covered executives in the three completed fiscal years preceding any restatement (scope and recovery terms defined) .

Equity Ownership & Alignment

• Dollar range of ARCC equity for portfolio managers indicates “Over $1,000,000” for Michael J Arougheti, demonstrating material alignment with shareholders .

Employment Terms

• Not an employee of ARCC; no ARCC employment contract, severance, or change‑of‑control economics disclosed for Arougheti (his compensation/employment is through Ares) .
• ARCC has indemnification agreements with directors/officers and USDL Investment Committee members, providing advancement of expenses and maximum indemnification permitted under Maryland law and the Investment Company Act .
• Insider trading policy prohibits hedging, short‑selling, and pledging of ARCC securities by directors/officers/adviser personnel .

Board Governance

• Status: “Interested” Director (not independent) due to roles at Ares and ARCC .
• Board Leadership: Co‑Chairs are Mitchell Goldstein and Michael L. Smith (both interested), with Eric B. Siegel serving as Lead Independent Director since 2010 to provide independent oversight and executive sessions .
• Committees: Audit, Nominating & Governance, and Co‑Investment Committees are comprised solely of independent directors; Arougheti does not serve on these committees .
• Board/Committee Meetings in 2024: Board (8), Audit (6), Nominating & Governance (2), Co‑Investment (22); all directors then in office attended ≥75% of the aggregate meetings on which they served .
• Historical attendance context: In 2019, ISS/Glass Lewis flagged attendance; ARCC clarified Arougheti attended 100% of regularly scheduled meetings and >84% over five years, urging re‑election support .

Director Compensation

• Interested directors (including Arougheti) receive no ARCC director compensation; independent directors are paid cash retainers and meeting fees (e.g., 2024 fees ranged $243,000–$285,000 depending on roles), but no equity grants are disclosed; ARCC also purchases D&O insurance .

Other Directorships & Interlocks

• Current: Ares Management Corporation, Ares Commercial Real Estate Corporation, Ares Acquisition Corporation II; prior Co‑Chair of Ares Acquisition Corporation; philanthropic board service at Operation HOPE .
• Related‑party framework: ARCC’s adviser/administrator are Ares subsidiaries; fees approved and overseen by independent Audit Committee; ARCC’s policies and BDC regulation address related‑party transactions/conflicts .

Compensation Structure Analysis

• Alignment positives: Variable incentive comp at Ares linked to ARCC performance; meaningful personal ARCC equity (“Over $1,000,000”); hedging/pledging prohibited; director ownership guidelines met by all directors .
• Governance mitigants: Independent‑only committees; Lead Independent Director and executive sessions; formal clawback policy adopted .
• Potential concerns: Board Co‑Chairs are “interested,” elevating independence optics; compensation specifics (metrics/vests) for Ares‑paid executives are not disclosed at ARCC, limiting pay‑for‑performance transparency at the public vehicle .

Performance & Track Record

• Transaction leadership: Allied Capital acquisition (agreed Oct 26, 2009; closed Apr 1, 2010) contributed materially to NAV increase and one‑year TSR outperformance versus peer BDCs, evidencing value creation in dislocated markets .
• Portfolio management: As part of ARCC’s USDL investment leadership cohort, involved in origination/execution/portfolio management across cycles .

Equity Ownership & Alignment Table (Beneficial Ownership Detail)

Investment Implications

• Compensation alignment: Although Arougheti’s compensation is paid by Ares (limiting granular disclosure at ARCC), the structure includes variable incentive tied to ARCC performance and significant personal stock ownership, supporting alignment; prohibitions on hedging/pledging reduce misalignment risk .
• Governance consideration: Board independence is safeguarded via independent‑only committees and a Lead Independent Director, but dual “interested” Co‑Chairs warrant continued monitoring for independence optics; robust clawback and insider policies are in place .
• Retention risk & transparency: As an Ares executive, retention risk is influenced by firm‑level economics rather than ARCC contracts; lack of ARCC‑level compensation detail may limit pay‑for‑performance transparency, but historical execution (e.g., Allied and subsequent portfolio performance) indicates value creation capability in dislocated markets .