Laurence Penn
About Laurence Penn
Laurence E. Penn is Chief Executive Officer, President, and an Interested Trustee of Ellington Credit Company (EARN); age 63 as of the 2025 proxy and serving in these roles since October 2012, with board service since the Fund’s inception in September 2012 . He is Vice Chairman of Ellington Management Group (EMG) since 1995 and CEO/President of Ellington Financial Inc. (EFC) since 2007, and a member of EMG’s Investment and Risk Management Committee . Under his tenure, EARN completed a strategic transformation from an Agency MBS REIT to a registered investment company focused on CLOs, including revoking REIT status in 2024 and converting to a Delaware statutory trust on April 1, 2025, continuing to trade on NYSE under “EARN” . The 2025 proxy does not disclose TSR, revenue or EBITDA growth metrics for Penn; current compensation alignment is primarily through the external adviser’s base and performance fee structure .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Ellington Credit Company (EARN) | Chief Executive Officer, President & Trustee | Since Oct 2012; Trustee since Sep 2012 | Oversaw period including 2024–2025 strategic transformation and conversion to a 1940 Act closed-end fund focused on CLOs; Fund remained listed as EARN |
| Ellington Management Group (EMG) | Vice Chairman; Exec VP of EARN’s Adviser; Member, Investment & Risk Management Committee | Since 1995 | Day-to-day oversight via adviser role; risk oversight through EMG committee supporting Fund strategy and risk management |
| Ellington Financial Inc. (EFC) | Chief Executive Officer & President | Since Aug 2007 | Cross-platform leadership; relevant experience in structured credit investing |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Ellington Financial Inc. (NYSE: EFC) | Director | Since 2007 | Current outside public company directorship; committee roles not disclosed in EARN proxy |
| Ellington Income Opportunities Fund | Trustee | Since Oct 2018 | Closed-end management investment company |
Fixed Compensation
| Component | Structure/Amount | Terms | Source |
|---|---|---|---|
| CEO/President (Penn) – Fund cash comp | None paid directly by Fund | Executives are EMG employees; EARN does not pay or reimburse NEO cash comp; Penn participates indirectly in adviser profits via EMG ownership; no additional EMG comp for managing EARN | |
| CFO/COO/Admin personnel – Fund reimbursements | Allocable portion reimbursed under Administration Agreement | Admin Agreement effective Apr 1, 2025; reimbursements based on time allocation; for FY2024 estimate of ~$1.6mm that would have been paid had the agreement been in place | |
| Trustee compensation (Independent Trustees) | $70,000 annual retainer; Chair add’l $25,000; Audit Chair $15,000; Nominating & Governance Chair $7,500; historical restricted shares ~$100,000 grant value (terminated going forward) | 2024 program only; equity awards under 2023 plan terminated pre-Conversion; 1940 Act prohibits restricted share awards to trustees/officers going forward | |
| Trustee compensation (Interested Trustees incl. Penn) | No board fees | Interested Trustees do not receive board compensation from Fund |
Performance Compensation
| Metric | Weighting | Target | Actual | Payout Formula | Vesting/Clawback | Source |
|---|---|---|---|---|---|---|
| Pre-Performance Fee Net Investment Income (NII) vs Hurdle | Not expressed as % of exec comp; adviser performance fee equals 17.5% of NII after “catch-up” | Hurdle Rate = 2.00% of Common Equity NAV per quarter (8.00% per annum); Hurdle Amount = prior-quarter NAV of Common Equity × Hurdle Rate, adjusted for share changes | Not disclosed | If NII ≤ Hurdle → $0; if NII between Hurdle and 121.21% of Hurdle → 100% of excess (“catch-up”) until fee equals 17.5% of NII; if >121.21% of Hurdle → 17.5% of NII | No accumulation of hurdle; no clawback of paid amounts; fees paid quarterly in arrears |
Note: The Fund’s compensation drivers for senior management are indirect through EMG/adviser economics (Base Management Fee 1.50% per annum on NAV and Performance Fee per table), not through individual NEO grants or cash bonuses at the Fund level .
Equity Ownership & Alignment
| Holder | Shares Beneficially Owned | % of Outstanding | Vested vs Unvested | Options (Exercisable/Unexercisable) | Pledging/Hedging | Ownership Guidelines |
|---|---|---|---|---|---|---|
| Laurence E. Penn | 35,710 | <1% (“*” denotes <1%) | Not disclosed; no vesting footnote for Penn in proxy table | None disclosed | Not disclosed in proxy; governance materials incl. Insider Trading Policy available on website | Not disclosed in proxy |
| All executives and trustees (10 persons) | 510,442 | 1.4% | Includes specified unvested shares for certain officers (not Penn): e.g., Smernoff and Herlihy future vesting dates | None disclosed | Not disclosed | Not disclosed |
Additional alignment considerations:
- Post-Conversion, the 1940 Act restricts granting restricted shares to trustees/officers; equity awards to insiders under prior equity plans were terminated .
- Adviser fee basis may incentivize asset growth (Base Fee on NAV) and consistent NII generation (Performance Fee), which may or may not align with long-term NAV per share and market TSR .
Employment Terms
- Employment relationship: Executives (including Penn) are employed by EMG and made available to EARN’s Adviser/Administrator via a Services Agreement; Fund does not pay direct compensation to NEOs .
- Time commitment: NEOs are not required to devote a specific percentage of time to Fund business .
- Administration Agreement termination: Fund may terminate without penalty on ≥60 days’ notice; Administrator may terminate on ≥90 days’ notice; costs reimbursed are allocable personnel and overhead; outsourced fees paid on a direct, no-profit basis .
- Change-in-control/severance, non-compete, non-solicit, garden leave: Not disclosed in the proxy for Penn or other NEOs.
- Clawbacks: Adviser performance fee has no clawback; previously agreed waiver of performance fees through Q1 2025 .
Board Governance
| Item | Details | Source |
|---|---|---|
| Board structure | Six trustees; four Independent Trustees; Penn is an Interested Trustee | |
| Chair vs CEO | Roles separated; Board deems separation appropriate; no fixed policy | |
| Committees | Audit; Nominating & Corporate Governance; both comprised solely of Independent Trustees | |
| Committee membership | Audit: Chair Allardice; Members McBride, Miller, Simon; 5 meetings in 2024. Nominating & Corporate Governance: Chair Simon; Members Allardice, Miller, McBride; 4 meetings in 2024 | |
| Executive sessions | Independent Trustees met seven times without management in 2024 | |
| Attendance | 17 Board meetings in 2024; each current trustee attended ≥75% of Board and committee meetings; all attended 2024 Annual and Special Meetings | |
| Independence assessment | Majority independent per 1940 Act; annual questionnaires to monitor relationships | |
| Risk oversight | Audit Committee leads; EMG Investment & Risk Management Committee includes Penn and Vranos; regular reporting to Board |
Director Compensation
| Director Type | Annual Cash Retainer | Chair/Committee Fees | Equity | Notes | Source |
|---|---|---|---|---|---|
| Independent Trustees | $70,000 | Board Chair $25,000; Audit Chair $15,000; Nominating & Governance Chair $7,500; former Compensation Chair $7,500 | 2024 award of 14,472 restricted shares (~$100,002 grant-date fair value) with vesting split; equity plans terminated before Conversion | Reimbursement of travel; going forward, 1940 Act prohibits restricted share awards to trustees/officers | |
| Interested Trustees (incl. Penn) | $0 | $0 | $0 | No compensation for board service |
Related Party Transactions and Advisory Economics
- Adviser and Administrator are affiliates (under common ownership with EMG); fees accrue to benefit of EMG owners; EARN pays base and performance fees to Adviser and reimburses Administrator costs; services are supported by EMG under a Services Agreement with EARN as third-party beneficiary .
- Post-Conversion 1940 Act restrictions limit certain transactions with affiliates absent exemptive relief .
Equity Ownership Detail (Snapshot as of April 10, 2025)
| Name | Common Shares Beneficially Owned | % of Outstanding | Notes |
|---|---|---|---|
| Laurence E. Penn | 35,710 | <1% | Address: 53 Forest Avenue, Old Greenwich, CT 06870 |
| Shares Outstanding | 37,559,195 | — | Record date reference: Mar 31, 2025; quorum info also cites outstanding count |
Performance & Track Record
- Strategic transformation: Board approved CLO-focused transformation Mar 29, 2024; REIT election revoked effective Jan 1, 2024; used NOLs to offset majority of federal taxable income during C-Corp period; completed Conversion Apr 1, 2025; liquidated remaining mortgage-related assets thereafter; continued NYSE listing as EARN .
- Audit and reporting: PwC appointed as independent auditor for FY ending Mar 31, 2026; fee history disclosed for 2023–2024 .
Compensation Structure Analysis
- Shift from equity grants to none for insiders post-Conversion: Equity plans terminated; 1940 Act prohibits grants to trustees/officers, reducing direct equity-based alignment and placing emphasis on adviser fee economics .
- Adviser fee mix: Base Fee on NAV (1.50% p.a.) incentivizes asset growth; Performance Fee tied to quarterly NII above an 8% annual hurdle, payable without clawback, potentially emphasizing short-term income generation over long-term NAV per share/TSR .
- Discretionary bonuses/sign-on/retention: Not disclosed for Penn; NEO cash comp not paid by Fund .
Risk Indicators & Red Flags
- No clawback on performance fees; no accumulation of hurdle amounts across quarters .
- Extensive affiliate transactions via external manager/administrator; mitigated by 1940 Act restrictions and committee oversight, but inherent conflicts exist .
- Pledging/hedging policies: Not disclosed in proxy; corporate governance materials (including Insider Trading Policy) available on website .
- Say-on-pay: Not disclosed; typical for registered investment companies to have different governance regimes; no data in proxy .
Board Service History for Laurence Penn and Dual-Role Implications
- Board service: Trustee since inception (Sep 2012); Interested Trustee .
- Committees: Not a member of Audit or Nominating & Corporate Governance committees (independents only) .
- Independence considerations: Board maintains separate Chairman (Allardice) and CEO roles; majority independent; executive sessions held regularly; mitigates CEO/Trustee dual-role concerns, though Penn’s affiliation with EMG/adviser presents structural conflicts common to externally managed funds .
Equity Ownership & Alignment — Additional Snapshot
| Category | Dollar Range of Equity Securities | Notes |
|---|---|---|
| Penn (Interested Trustee) | $100,001–$500,000 in EARN; aggregate same across registered funds overseen | Based on NAV per share $6.53 as of Dec 31, 2024 |
| Vranos (Interested Trustee) | $500,001–$1,000,000 in EARN | Includes EMG Holdings L.P. shares (shared voting/dispositive power) |
Employment Terms — Compliance/Administration
| Item | Details | Source |
|---|---|---|
| Chief Compliance Officer | Provided via Vigilant Compliance, LLC; 2024 fees ~$33,600; expected FY 2025/26 fees ~$55,800 | |
| Insider policies | Code of Ethics, Rule 17j-1 Code, Insider Trading Policy available via website |
Investment Implications
- Pay-for-performance alignment is driven by external adviser fees: Base Fee tied to NAV and Performance Fee tied to NII above a quarterly hurdle may encourage asset growth and income generation; absence of clawbacks increases asymmetry of outcomes and could amplify short-term risk-taking in pursuit of NII, especially in CLO strategies .
- Equity alignment is modest at the Fund level for Penn (<1% stake) and, post-Conversion, no further insider restricted share awards will be granted; this reduces direct stock-based alignment and places greater emphasis on EMG/adviser economics for management incentives .
- Governance mitigants include a separated Chair/CEO structure, majority-independent Board, independent-only committees, and regular executive sessions; however, dual-role and affiliated manager structure remain core governance risks to monitor via fee disclosures, related party oversight, and 1940 Act compliance .
- Trading signals: Monitor quarterly NII relative to the 2% hurdle and NAV trajectory, as these directly impact adviser fees and may correlate with insider selling/pressure if future vesting for other officers materializes; for Penn specifically, no vesting schedules are disclosed, and no pledging/hedging disclosures appear in the proxy .