John Reed
About John Reed
John Reed, age 70, is Founder, Chairman, and Chief Executive Officer of Arhaus (ARHS). He co-founded Arhaus in 1986, served as CEO from 1997–2015, and returned as CEO in February 2017 through the reorganization into Arhaus, Inc.; he has served as a director since July 2021 and is not independent. The board employs a combined CEO/Chair model with an Independent Lead Director (Albert Adams). Recent company performance indicators disclosed in the proxy: 2024 TSR value of an initial $100 investment was $75.97 (vs. $92.58 in 2023); net income was $69 million (2023: $125 million; 2022: $137 million); Adjusted EBITDA was $133 million (2023: $203 million; 2022: $223 million). Say‑on‑pay support at the 2024 annual meeting was ~98%.
| Performance Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| TSR – Value of initial $100 | $76.17 | $92.58 | $75.97 |
| Net Income ($mm) | $137 | $125 | $69 |
| Adjusted EBITDA ($mm) | $223 | $203 | $133 |
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Arhaus, LLC / Arhaus, Inc. | Founder; CEO (1997–2015; 2017–present); Chairman (since 2013 at LLC); Director (since 2021 at Inc.) | 1986–present | Founder‑led strategy; long‑tenure leadership across private-to-public transition |
External Roles
- No external public company directorships or committee roles for Mr. Reed were disclosed in the latest proxy statement.
Fixed Compensation
Multi‑year CEO compensation detail:
| Component | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | 1,379,953 | 1,445,231 | 1,491,280 |
| Discretionary Bonus ($) | — | 173,428 | — |
| Non‑Equity Incentive (AIP) ($) | 1,655,944 | 520,283 | — |
| Stock Awards ($) | — | — | — |
| All Other Compensation ($) | 563,941 | 735,035 | 766,248 |
| Total ($) | 3,599,838 | 2,873,977 | 2,257,528 |
Perquisites detail (2024): personal aircraft use ($639,094), merchandise discount above employee discount ($91,366), 401(k) match ($13,507), executive healthcare ($16,000), club memberships ($3,362), disability insurance ($1,290), incidental travel ($1,629).
Performance Compensation
Annual Incentive Plan (AIP) design and 2024 outcome
- Design: Target bonus opportunity for CEO = 60% of salary; payout curve range 25%–200% of target. Metrics: Adjusted EBITDA (pre‑bonus) and Demand; matrix‑based outcomes set vs. budget.
- FY 2024 Result: Demand achieved at target; Adjusted EBITDA below threshold → 0% AIP payout for all NEOs (including CEO).
| Metric | Weighting | FY 2024 Target | FY 2024 Actual | Payout | Vesting/Timing |
|---|---|---|---|---|---|
| Adjusted EBITDA (pre‑bonus) | Not disclosed | Not disclosed | Below threshold | 0% | Annual cash (2024 performance) |
| Demand | Not disclosed | Target | Achieved target | 0% (matrix outcome) | Annual cash |
Long‑term incentives (LTIs)
- CEO equity awards: No RSUs/PSUs were granted to Mr. Reed in 2022, 2023, or 2024, and he had no outstanding equity awards at year‑end 2024.
- Program design for other NEOs in 2024 (context): Mix of RSUs (time‑vest, 1/3 per year) and PSUs (3‑year performance on cumulative Demand Revenue and cumulative Adjusted EBITDA; 0–200% payout), but CEO excluded from grants.
Clawback and restatement
- Dodd‑Frank compliant clawback adopted Oct. 3, 2023; company restated Q3’23 cash flow classifications in 2024; the Compensation Committee determined the restatements did not impact metrics used for executive pay, thus no recovery required.
Equity Ownership & Alignment
| Ownership Detail (as of Mar 17, 2025) | Amount |
|---|---|
| Class A shares beneficially owned | 51,969 |
| Class B shares beneficially owned | 45,078,259 (direct + trust) |
| Combined shares (A + B, for voting) | 45,130,228 |
| Combined voting power | 48.76% |
| Notes | Class B carries 10 votes/share; holdings include direct and trust ownership per footnotes |
- Vested vs. unvested: No outstanding unvested RSUs/PSUs for Mr. Reed at year‑end 2024.
- Pledging/hedging: Company policy prohibits officers and directors from pledging, short sales, or hedging Company stock.
- Ownership guidelines: Not disclosed in the proxy.
Insider trading signals (Form 4 references)
- Company IR hosts Mr. Reed’s Form 4s indicating purchases (including by related trusts/joint tenancy). No specific open‑market sales by Mr. Reed were identified in these linked filings.
Employment Terms
- No employment agreement with Mr. Reed; no severance or change‑in‑control benefits listed for him in the potential payments table (all entries blank).
- For context: other NEOs generally receive 6 months’ base salary and 6 months’ COBRA upon qualifying termination; equity awards have double‑trigger treatment around changes in control (assumption/substitution rules; RSUs/PSUs vest on specified double‑trigger events).
Board Governance (Service history, committees, independence)
- Board service: Director since July 2021; Class III director; term expires 2027; Chairman of the Board; CEO and Chairman roles combined; Independent Lead Director is Albert Adams. Mr. Reed is not independent.
- Committee roles: Mr. Reed is not listed on Audit, Compensation, Nominating & Corporate Governance, Real Estate, or Technology Committees.
- Attendance: All 2024 directors each attended >75% of meetings; board held 8 meetings in 2024.
Director compensation context (for non‑employee directors)
- Standard cash retainer $80,000; lead independent premium $30,000; committee chair retainers $15,000 (Audit Chair $20,000); annual RSU grant ~$110,000 value vesting in ~1 year. (Mr. Reed, as CEO, is not in the non‑employee director compensation table.)
Related Party Transactions (Governance risk review)
| Transaction | Counterparty (Founder Ownership) | Key Terms | 2024 Payments |
|---|---|---|---|
| Lease – Conover, NC distribution center | Premier Conover, LLC (Founder indirectly 40%) | 12‑year term from 2021; options to extend; base rent ~$263,015/month at 12/31/24 | $3,872,446 |
| Lease – Walton Hills, OH warehouse | Pagoda Partners, LLC (Founder indirectly 50%) | Extended to 2034; purchase option; rent ~$132,694/month at 12/31/24 | $1,647,213 |
| Lease – Brooklyn, OH Outlet | Brooklyn Arhaus (Founder 85%; Director Beargie 15%) | Base rent ~$19,995/month at 12/31/24 | $271,606 |
| Employment – Founder’s son | Ryan Reed (SVP, Real Estate) | Base salary $390,000 | $1,101,151 total comp (FY 2024) |
- Policy: Audit Committee reviews/approves related‑party transactions; considers independence impacts.
Compensation Committee, Peer Group, Say‑on‑Pay
- Compensation Committee: Adams (Chair), Beargie, DePree, Roth; uses Aon as independent compensation consultant; reviews a retail peer set for market context (not strict benchmarking).
- 2024 Peer Group (selected): RH; Williams‑Sonoma; Floor & Decor; La‑Z‑Boy; Oxford Industries; Tapestry; Capri; Tempur Sealy; Ethan Allen; Haverty; Purple; Lovesac; Beyond, Inc.; The RealReal; Movado; Vera Bradley; The Aaron’s Company; Sleep Number.
- Say‑on‑pay: ~98% approval at 2024 annual meeting.
Risk Indicators & Red Flags
- Dual role and control: Combined CEO/Chair with substantial voting control (48.76%); mitigated by Independent Lead Director structure.
- Related‑party leases and family employment: Multiple founder‑related real estate leases and employment of Founder’s son; overseen under related‑party policy but notable from a governance risk perspective.
- Restatement history: 2024 restatements of Q3’23 cash flow classifications; clawback review determined no impact on comp metrics and no recovery.
- Hedging/pledging: Prohibited by policy for officers/directors, reducing alignment risk from collateralized positions.
- CFO turnover: CFO Dawn Phillipson resigned effective Jan 15, 2025 (no severance).
Investment Implications
- Alignment: Reed’s very large Class B ownership and ~49% voting power strongly align him with long‑term equity value, but also concentrate control; absence of new CEO equity awards in 2022–2024 reduces incremental vest‑related selling pressure.
- Pay‑for‑performance: 2024 AIP paid 0% given sub‑threshold Adjusted EBITDA despite Demand at target; reflects a formulaic downside link. Lack of CEO LTI grants shifts mix toward fixed/perks but overall founder ownership dominates alignment.
- Governance: Combined CEO/Chair plus related‑party leases and family employment require continued independent oversight; presence of an Independent Lead Director and active committees partially mitigates.
- Execution and performance: Softness in 2024 TSR and profitability (vs. 2022–2023) underscores execution risk into 2025; however, PSU outcomes for other NEOs (2022–2024 cycle) at 110.27% suggest multi‑year targets were broadly achieved.