Arthur L. Smith
CREDIT ACCEPTANCEAbout Arthur L. Smith
Arthur L. Smith (age 52) is Chief Analytics Officer (CAO) of Credit Acceptance, a role he has held since August 2013 after joining the company in April 1997 and advancing through risk and leadership roles . Company performance context: in 2024, GAAP net income was $247.9M and “economic profit” was $200.3M; five‑year Pay‑vs‑Performance disclosure shows Company TSR of $106.09 versus a peer index TSR of $198.91 (base $100 in 2020), framing the environment in which executive pay aligns with outcomes .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Credit Acceptance | Credit Analyst (Dealer Service Center) | Apr 1997–1998 | Not disclosed in proxy |
| Credit Acceptance | Manager, Dealer Risk | 1998–2005 | Not disclosed in proxy |
| Credit Acceptance | Director | 2005–2007 | Not disclosed in proxy |
| Credit Acceptance | Vice President | 2007–2008 | Not disclosed in proxy |
| Credit Acceptance | Senior Vice President | 2008–Aug 2013 | Not disclosed in proxy |
| Credit Acceptance | Chief Analytics Officer | Aug 2013–Present | Leads analytics function (title only; biography provides no further detail) |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| — | — | — | His 2025 proxy biography does not mention external directorships or outside roles |
Fixed Compensation
- Structure: No annual cash bonus program for 2021–2024; compensation shifted to higher base salary plus long‑term equity. A new 2025–2034 long‑term plan increased base salaries effective 2025 .
| Metric | 2022 | 2023 | 2024 | 2025 Change |
|---|---|---|---|---|
| Base Salary ($) | $700,000 | $700,000 | $700,000 | $770,000 (+10.0%) |
| All Other Compensation ($) | $17,748 | $17,819 | $18,237 | — |
Notes:
- Base salaries for Smith and certain NEOs were last changed in 2021 and remained unchanged through 2024; beginning in 2026, annual increases are expected to be 3% absent special circumstances .
Performance Compensation
- 2025–2034 equity is delivered entirely in RSUs for non‑CEO NEOs; the 2021–2024 period relied on earlier stock option awards (no annual cash bonuses) .
Equity Grants (2024)
| Grant Type | Grant Date | Shares/Units | Grant Date Fair Value ($) | Vesting | Settlement |
|---|---|---|---|---|---|
| RSUs | 12/3/2024 | 28,290 | $13,633,234 | 10 equal annual tranches beginning 1/31/2026 and on the nine subsequent anniversaries (service‑based) | For Smith: 75% “Base RSUs” settle 50% on vest date and 50% one year later; 25% “Retirement RSUs” settle 5 years after termination (2 years if age 60+) |
- Sizing target: RSU quantities were set so that executives earn target 10‑year incentive values only if the stock price compounds at 11% CAGR (above cost of capital) from 2025–2034; realized value varies with shareholder value creation .
Outstanding and 2024 Realization
| Instrument | Status at 12/31/2024 | Key Terms |
|---|---|---|
| Stock Options | 37,500 exercisable; exercise price $333.94; expire 12/30/2026 | Option details for Smith’s tranche are not listed as performance‑conditioned in the proxy table; only exercise price and expiry disclosed |
| RSUs | 28,290 unvested; year‑end fair value $13,281,023 at $469.46/share | 10‑year service‑based vesting starting 1/31/2026; settlement mechanics as above |
| 2024 Option Exercise | 12,500 shares exercised; value realized $2,753,451 | Indicates monetization activity during 2024 |
Other Variable Compensation
| Program | Metric | 2024 Payout |
|---|---|---|
| Profit Sharing Program (broad‑based; all except CEO) | Company “economic profit” | $941 |
Performance Metrics and Weighting
| Metric | Weighting | Target | Actual | Payout Link | Vesting Link |
|---|---|---|---|---|---|
| Share price (for RSU value realization) | N/A | 11% stock price CAGR used to size RSU grants | Company TSR index value: $106.09 (2020–2024) | RSU value varies with share price; no cash bonus | Time‑based RSU vesting over 10 years (service) |
| Economic Profit (broad program) | N/A | Not disclosed | $200.3M (2024) | Profit Sharing payout of $941 in 2024 | Not applicable to RSU vesting |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 38,000 shares; less than 1% of outstanding (11,747,851 shares outstanding) |
| Options (Exercisable) | 37,500 at $333.94; expire 12/30/2026 |
| RSUs (Unvested) | 28,290; fair value $13,281,023 at 12/31/24 |
| Settlement Deferral (2024 Grants) | For Smith: 75% Base RSUs settle half on vest date, half one year later; 25% Retirement RSUs settle 5 years post‑termination (2 years if 60+) |
| Clawback | Company maintains a Dodd‑Frank compliant clawback for erroneously awarded incentive‑based compensation upon restatement |
| Hedging | Company prohibits executive and director hedging of Company securities (e.g., collars, swaps, exchange funds) |
Insider selling pressure indicators:
- 2024 option exercise of 12,500 shares with $2.75M value realized signals liquidity activity in year; future RSU settlements begin 1/31/2026 and annually thereafter (Base RSUs partly settle at vest and one year later), creating potential periodic supply, though sales are discretionary .
Employment Terms
| Topic | Terms |
|---|---|
| Employment Agreement / Severance | No individual agreements providing cash severance or benefits continuation upon termination (pre‑ or post‑change in control) |
| Equity on Termination | Unvested options/RSUs generally forfeited; Committee may waive/change restrictions at its discretion |
| Change in Control (CIC) | Double‑trigger: if awards are assumed/substituted, vest on termination without cause or resignation for good reason within 24 months after CIC; if not assumed/substituted, vest on CIC |
| CIC RSU Acceleration (2025–2034 RSUs) | If assumed/substituted and qualifying termination occurs, vests the amount that would have vested over the next three scheduled vest dates (or the remaining unvested amount if less) |
| Potential CIC Acceleration Value (12/31/24) | For Arthur L. Smith: $13,281,023 (unvested RSUs) |
| Anti‑Hedging / Clawback | Hedging prohibited; clawback policy acknowledged in writing by current executives |
Compensation Structure Analysis
- Shift to long‑duration equity: For 2025–2034, Smith’s incentives are 100% RSUs with 10‑year time‑based vesting and deferred settlement features (no annual equity refresh anticipated), magnifying long‑term owner alignment and retention through settlement deferral and retirement RSUs .
- No annual cash bonus: 2021–2024 eliminated annual cash incentives; fixed salary plus long‑term equity was the focus; 2024 total pay primarily reflects the large 10‑year RSU grant [$13.63M grant‑date value] .
- Governance/safeguards: Section 954‑style clawback and prohibition on hedging reduce misalignment risk; say‑on‑pay received 98.4% approval in 2024, indicating strong shareholder support .
Say‑on‑Pay & Shareholder Feedback
- 2024 say‑on‑pay approval: 98.4% of votes cast; the Compensation Committee determined no changes were needed for 2024 and adopted the 2025–2034 plan to further emphasize long‑term value creation .
Compensation Committee
- Members: Scott J. Vassalluzzo (Chair), Glenda J. Flanagan, Vinayak R. Hegde, Sean E. Quinn; committee reviewed CD&A and recommended its inclusion in the proxy .
Investment Implications
- Alignment: Smith’s 10‑year RSU grant (28,290 units) with service‑based vesting, settlement deferral, and retirement RSUs tightly links wealth to sustained stock performance and tenure; no cash severance and forfeiture on voluntary departure increase retention and reduce “pay for failure” risk .
- Overhang and supply: Beginning 1/31/2026, annual RSU vesting with partial near‑term settlement can introduce periodic insider supply; 2024 option exercises (12,500 shares; $2.75M realized) show willingness to monetize when appropriate, a potential trading signal around vest dates and windows .
- Performance sensitivity: RSU economics scale with share price; grant sizing assumed 11% stock price CAGR over 2025–2034, embedding a demanding hurdle for target incentive value realization relative to cost of capital .
- Governance quality: Robust clawback and anti‑hedging policy plus strong say‑on‑pay support (98.4%) mitigate governance red flags; absence of individual severance agreements limits parachute risk; CIC terms are double‑trigger with defined RSU acceleration caps (three future tranches) .
Appendix: Key Multi‑Year Compensation Figures (from Summary Compensation Table)
| Year | Salary ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) |
|---|---|---|---|---|
| 2024 | $700,000 | $13,633,234 | $18,237 | $14,351,471 |
| 2023 | $700,000 | — | $17,819 | $717,819 |
| 2022 | $700,000 | — | $17,748 | $717,748 |