Laurence Penn
About Laurence Penn
Laurence E. Penn (age 63) is Chief Executive Officer, President, and a Director of Ellington Financial Inc. (EFC), roles he has held since the company’s inception in August 2007; he is also Executive Vice President of Ellington Financial Management (EFC’s external manager) and Vice Chairman of Ellington Management Group (EMG), serving on EMG’s Investment and Risk Management Committee . Penn previously spent 1984–1995 at Lehman Brothers, ultimately as Managing Director and co-head of CMO origination and trading, after leading the structured transaction modeling group (1987–1990); he earned a Master of Advanced Study in Mathematics from Cambridge University (NSF Fellow and Winston Churchill Scholar) and a B.A. in Mathematics from Harvard (summa cum laude, Phi Beta Kappa) . Company performance disclosure under his tenure shows cumulative total shareholder return (TSR) of $119.53 for a $100 investment (2019–2024 basis) versus $79.96 for the mortgage REIT peer index in 2024 and GAAP net income of $148.1 million in 2024 .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Ellington Management Group (EMG) | Vice Chairman; member, Investment and Risk Management Committee | 1995–present | Helps oversee firm functions and risk oversight influencing EFC’s investment policies and hedging via EMG’s committee |
| Lehman Brothers | Managing Director; co-head of CMO origination and trading | 1990–1995 | Led CMO derivatives trading; co-created “BondTalk” modeling language improving structured products analytics |
| Lehman Brothers | Head, structured transaction modeling group | 1987–1990 | Structured/modeling for MBS/ABS; system design foundational to later trading leadership |
| Ellington Financial Inc. | Chief Executive Officer and President | 2007–present | Overall strategy, capital allocation, and execution for EFC’s mortgage/credit platform |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Ellington Residential Mortgage REIT (NYSE: EARN) | CEO, President, and Trustee | Current | Dual executive/director role at affiliate externally managed by EMG |
| Ellington Income Opportunities Fund | Trustee | Since Oct 2018 | Closed-end fund oversight; governance/strategy input |
| EMG Investment and Risk Management Committee | Member | Current | Advises on investment policies, portfolio, financing, hedging |
Fixed Compensation
Penn receives no cash compensation directly from EFC; as an externally managed company, EFC does not pay salary or cash bonus to its CEO/PEO, and the Summary Compensation Table reports $0 for the PEO for 2020–2024 . EFC also states it has no agreements with executive officers regarding cash compensation and does not intend to pay cash compensation directly; executives are employees of EMG .
| Component | EFC-Paid Amount | Period | Notes |
|---|---|---|---|
| Base salary (PEO) | $0 | 2020–2024 | No cash paid by EFC to PEO under external management model |
| Cash bonus (PEO) | $0 | 2020–2024 | No cash bonus paid by EFC to PEO |
Performance Compensation
EFC does not grant formulaic, metric-tied pay to executives; EMG and EFC state discretionary assessments are used (e.g., role, contribution, company/EMG performance, market practices), with no fixed performance metric weightings or contractual formulas . For 2024, EFC estimates that Non-Reimbursed NEO compensation (which includes the CEO) associated with EFC’s management fees was approximately $6.4 million (≈27% of $23.5 million net base management fees), ~3% fixed and ~97% variable; in 2023, the company estimated none of Non-Reimbursed NEO compensation was associated with EFC’s management fees .
| Element | Metric Linkage | 2024 Detail | 2023 Detail | Vesting/Delivery |
|---|---|---|---|---|
| CEO variable comp (via EMG) | Discretionary; no fixed metrics | Portion of $6.4m Non-Reimbursed NEO comp tied to EMG’s judgments; 97% variable overall for this cohort | No estimated association with EFC fees | Paid by EMG; not EFC equity; no EFC vesting disclosed for CEO |
| Company clawback policy | Restatement-based | Clawback adopted effective Nov 2, 2023; applies to executive officers’ incentive-based comp after Oct 2, 2023 | N/A | Recoupment upon restatement |
Note: EFC pays incentive equity and cash only to CFO/CAO; those awards (OP LTIP Units; deferral structures) are disclosed, but no EFC equity awards to the CEO are reported .
Equity Ownership & Alignment
| Holder | Beneficial Ownership | % of Shares Outstanding | Notes |
|---|---|---|---|
| Laurence E. Penn | 613,694 shares | <1% | Includes 469,372 shares held in an EMGH investment account and 38,759 shares with shared dispositive power; overlapping with holdings attributed to Mr. Vranos/affiliates as disclosed |
| Directors, officers, EMG partners/affiliates (alignment) | ~4% of outstanding common equity | — | As of Dec 31, 2024, officers/directors and EMG partners/affiliates owned ~4%, signaling alignment |
- Hedging/pledging: Directors/officers and EMG personnel are prohibited from short sales or derivative transactions designed to hedge EFC stock; no specific disclosure of stock pledging by executives was noted in the proxy .
- Ownership guidelines: Not disclosed in proxy; no CEO guideline compliance data provided .
Employment Terms
- Employer of record: Executives (including CEO) are employed by EMG; EFC has no cash compensation agreements with executives and does not intend to enter into such agreements .
- Severance/change of control: EFC generally has no obligation to executives upon termination or change in control because they are EMG employees; specific severance/CoC terms are disclosed for CFO/CAO awards, not for CEO .
- Management agreement economics: Base management fee 1.50% of Operating Partnership equity; 2024 base fees were $23.5 million (net of rebates), up from $20.4 million in 2023; incentive fees were $0 in 2024 and 2023 .
Board Governance
- Board service and independence: Penn has served as a Director since August 2007 and is not independent (four of five directors are independent: Dannhauser, Mumford, Resendez, Simon) .
- Leadership structure: CEO and Chair roles are separated; Dr. Ronald I. Simon is Chairman; the Board views separation as appropriate for oversight .
- Committees: All three standing committees (Audit, Compensation, Nominating/Corporate Governance) are composed solely of independent directors; Penn is not listed as a member .
- Attendance: In 2024, the Board held 13 meetings; each current director attended at least 75% of Board and committee meetings; directors, including Penn, attended the 2024 annual meeting . In 2023, the Board held 30 meetings with at least 95% attendance by each current director .
- Director compensation: Directors who are EMG officers (e.g., Penn) do not receive director compensation; independent directors receive cash retainers and OP LTIP Unit or Restricted Share awards .
Director Compensation (for context; Penn receives none)
| Component | 2024 Amount | Notes |
|---|---|---|
| Independent director annual cash retainer | $105,000 | Committee chair retainers: Audit $20,000; Compensation $8,000; Nominating $8,000; Board Chair $25,000; Longbridge board service $20,000 |
| Equity awards (independent directors) | ~$110,000 grant-date value | OP LTIP Units that vest over ~1 year; some exchanges into Restricted Shares in 2024 |
Say-on-Pay & Shareholder Feedback
- Say-on-pay approval: ~86% approval at the 2024 annual meeting for executive compensation (primarily CFO/CAO as EFC-paid NEOs) .
- Frequency: Annual say-on-pay; next frequency vote scheduled for 2029 .
- 2023 context: ~87% say-on-pay approval at 2023 annual meeting .
Related Party Transactions and Management Structure
- External management: EFC is externally managed by Ellington Financial Management (affiliate of EMG) under a management agreement; EMG personnel (including Penn) serve as EFC officers .
- Fee structure: Base fee 1.50% of Operating Partnership equity (quarterly in arrears); incentive fee formula based on Adjusted Net Income over Hurdle; no incentive fees incurred in 2024 or 2023 .
- Cross/principal transactions: Permitted under policies with independent director oversight; cross transactions generally at prevailing market prices unless otherwise approved .
Performance & Track Record
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| TSR value of $100 investment (Company) | $90.17 | $113.92 | $93.05 | $109.94 | $119.53 |
| TSR value of $100 investment (Peer: FTSE NAREIT Mortgage REIT Index) | $81.38 | $94.05 | $69.27 | $79.79 | $79.96 |
| Net Income (Loss) ($000s) | $28,377 | $140,556 | $(70,869) | $87,898 | $148,104 |
No “Compensation Actually Paid” to the PEO is reported because EFC does not compensate the PEO directly; the CEO’s compensation is paid by EMG .
Compensation Committee Analysis (Structure and Process)
- Committee composition: All independent directors; 2024 members included Resendez (Chair), Dannhauser, Mumford, Simon .
- Use of consultants: The committee did not use a compensation consultant for executive or director compensation .
- Process: CEO and Co-CIO recommend compensation for the two EFC-compensated NEOs (CFO/CAO), with committee approval; pay intended to encourage share ownership via OP LTIP Units and align with long-term interests .
Board Service History, Committee Roles, and Dual-Role Implications
- Board service: Director since August 2007 .
- Committee roles: None; all committees comprise independent directors .
- Leadership duality: CEO role combined with Director role; however, Chair is independent (Dr. Simon), mitigating concentration of power; the Board deliberately separates Chair/CEO to enhance oversight .
- Independence: Penn is not independent; four of five directors are independent under NYSE rules and company guidelines .
Risk Indicators & Red Flags
- Hedging/short sales: Prohibited for directors, officers, and EMG personnel (alignment-positive) .
- Clawback: Robust recoupment policy adopted in 2023 tied to financial restatements .
- Incentive fee risk: No incentive fees earned by the Manager in 2023–2024, reducing external fee-driven dilution pressure over that period .
- 16(a) compliance: 2023 reported two late Form 4s for independent directors (not the CEO) related to OP LTIP conversions; otherwise filings timely per representation .
Investment Implications
- Pay-for-performance and alignment: As an externally managed REIT, EFC’s CEO receives no direct EFC cash or equity, with compensation paid by EMG and largely variable for Non-Reimbursed NEOs (97% variable in 2024 estimate), aligning incentives with overall platform performance rather than EFC-specific formulas; absence of fixed performance metrics suggests reliance on discretionary assessments, which investors should monitor for transparency .
- Retention/overhang and selling pressure: No disclosed EFC equity awards or vesting schedules for the CEO reduces near-term stock-based selling pressure; CEO’s beneficial ownership is meaningful in absolute terms (613,694 shares) but less than 1% of shares outstanding; hedging is prohibited and no pledging is disclosed, which supports alignment and reduces forced-sale risk .
- Governance quality: Independent Chair, fully independent key committees, high attendance, and a restatement-based clawback are positives; CEO’s membership on EMG’s risk committee underscores strong domain expertise but also highlights the inherent related-party structure that investors should evaluate alongside base/incentive fee economics and cross/principal transaction oversight .
- Shareholder sentiment: Consistent say-on-pay approvals (mid-80s%–high-80s%) indicate general investor acceptance of the compensation framework for EFC-paid NEOs; continued disclosure on how EMG’s variable compensation aligns with EFC outcomes remains an engagement area .