Paul Krause

About Paul Krause

Paul Krause is Chief Legal Officer, Chief Compliance Officer, and Corporate Secretary at Harley‑Davidson (HOG). He has been employed by Harley‑Davidson since 2016 and was appointed to his current role on March 30, 2020; as of April 3, 2025 he is 47 years old and has ~9 years of tenure with the company . Prior roles include Senior Legal Counsel (2016–2018) and Assistant General Counsel (2018–2019), followed by Interim CLO/CCO in 2019, and a promotion to VP, CLO & CCO in March 2020 . Performance context: HOG’s 2024 short‑term incentive plan paid zero due to below‑threshold operating income ($526M vs $660M threshold) and negative core units growth, reinforcing pay‑for‑performance . For long‑term incentives, the 2022–2024 performance share cycle paid out at 90% of target after a positive TSR modifier based on peer-relative TSR; the prior 2021–2023 cycle paid 93.2% of target with a negative TSR modifier, evidencing alignment to multi‑year performance outcomes . Revenues were $4.148B in FY2024 vs $4.883B in FY2023, and EBITDA was $0.639B in FY2024 vs $1.013B in FY2023; longer‑term levels remain above FY2020 baselines, framing execution risk amid the Hardwire plan and market cycles (values retrieved from S&P Global)*.

Past Roles

External Roles

Fixed Compensation

• Base salary: $520,000 year‑end rate for 2024 (10% increase from 2023) ; salary paid in 2024 per SCT: $515,000 .
• Target bonus: 65% of base salary (2024) ; target bonus consistent at 65% in 2023 ($308,750 target) and 2022 ($292,500 target) via Grants of Plan‑Based Awards .
• Actual bonus/STIP: No 2024 STIP payout (below threshold performance) ; 2023 non‑equity incentive paid $205,010 .

Multi‑year compensation (Summary Compensation Table):

Performance Compensation

Short‑Term Incentive Plan (STIP) — 2024 design and results:

Long‑Term Incentives (PSUs and RSUs):

• 2024–2026 PSUs: Measures are 50% HDMC ROIC (3‑year average) and 50% HDMC Revenue (3‑year sum), with +/-15% TSR modifier vs BRP, Brunswick, Polaris, Thor, Winnebago; PSU vest at 0–200% of target . RSUs vest in 3 equal annual tranches; retirement vesting applies if age ≥55 and >12 months since grant .
• 2022–2024 PSUs: Stakeholder goals averaged annually, TSR modifier applied; payout achieved at 90% of target after a +10% TSR modifier based on peer‑relative TSR (Company ranked 2nd with -11.6% TSR vs peers) .
• 2021–2023 PSUs: Stakeholder goals with TSR modifier yielded a 93.2% payout of target after a -15% modifier (Company ranked 6th with +5.5% TSR) .

Grant detail (Plan‑Based Awards):

Notes:

• AIP PSUs vest only upon stock price thresholds ($70–$130 by 12/31/2025) with 50% immediate and 50% one‑year delayed vest on achievement; none earned through 2023 .

Equity Ownership & Alignment

• Beneficial ownership progression: 10,953 shares (Mar 6, 2023) → 19,614 shares (Mar 4, 2024) → 25,882 shares (Mar 6, 2025) ; each <1% of outstanding .
• RSUs held (not counted in % of class): 11,077 (2023) ; 11,571 (2024) ; 20,486 (2025) .
• Outstanding equity awards at FY‑end:
  • Dec 31, 2023: Unvested RSUs/earned PS: 16,488 units ($607,418); unearned PSUs/AIP: 30,968 units ($1,140,861) .
  • Dec 31, 2024: Unvested RSUs/earned PS: 18,303 units ($551,469); unearned PSUs/AIP: 32,361 units ($975,037) .
• Vesting schedule snapshots: | Vesting Date | RSUs & Earned PS (Qty) | Unearned PS & AIP (Vesting Date) | Unearned PS & AIP (Qty) | |---|---:|---|---:| | Feb 2024 | 11,647 | — | — | | Feb 2025 | 3,251 | Feb 2025 | 7,420 | | Feb 2026 | 1,590 | Feb 2026 | 3,548 | | By Dec 31, 2025 | — | AIP (by 12/31/2025) | 20,000 |
• Hedging/pledging: Prohibited across directors/officers/employees (anti‑hedging/pledging policy) .
• Ownership guidelines: Senior Executives (including NEOs) must hold 3x base salary; CEO 6x; five‑year phase‑in. As of Dec 31, 2024, CEO met his guideline; other NEOs had additional time (including Krause) .

Employment Terms

• Transition Agreements (double trigger): Cash severance equals two times the sum of highest annual base salary in the prior five years plus two times current target bonus; “good reason” within two years post‑CoC qualifies; equity does not vest immediately upon CoC; all LTI since 2019 uses double‑trigger vesting .
• Excise tax: No excise tax gross‑ups; payments reduced to avoid “excess parachute” or executive pays tax if larger after‑tax benefit .
• Estimated CoC payouts: | As‑of Date | Cash Severance ($) | Interrupted Bonus ($) | Other Benefits ($) | Equity Subtotal ($) | Total ($) | |---|---:|---:|---:|---:|---:| | 12/31/2022 | 1,485,000 | 880,001 | 40,874 | 2,447,282 | 4,894,031 | | 12/31/2023 | 1,567,500 | 308,750 | 40,810 | 3,961,554 | 5,878,614 | | 12/31/2024 | 1,716,000 | 338,000 | 42,062 | 897,132 | 2,993,194 |

Clawback: Company may recoup bonuses or incentive comp in excess of restated results for up to three years where fraud/intentional misconduct contributed to an SEC‑filed financial restatement; policy updated to comply with SEC Rule 10D‑1 .

Performance & Track Record

• STIP zero payout in 2024: Operating income and retail core units under threshold, highlighting performance rigor .
• Long‑term incentives:
  • 2022–2024 PSUs paid 90% after +10% TSR modifier (peer group: BRP, Brunswick, Polaris, Thor, Winnebago) .
  • 2021–2023 PSUs paid 93.2% after -15% TSR modifier (same peer group) .
• Company financials (annual): | Metric | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | |---|---:|---:|---:|---:|---:| | Revenues ($) | 3,264,054,000 | 4,540,240,000 | 4,934,505,000 | 4,882,892,000 | 4,148,264,000 | | EBITDA ($) | 323,237,000* | 999,462,000* | 1,106,804,000* | 1,013,179,000* | 638,898,000* |

Values retrieved from S&P Global*.

Compensation Structure Analysis

• Year‑over‑year mix: 2022 included a large AIP grant (20,000 aspirational PSUs for Krause) with significant accounting grant value but only pays if steep stock price hurdles are met; 2023–2024 continued balanced PSU/RSU mix (60%/40%), with STIP adding a sales growth metric in 2024 on shareholder feedback .
• Governance strength: Double‑trigger LTI vesting since 2019; no option repricing; clawback policy; anti‑hedging/pledging; ownership guidelines with phase‑in .
• Pay‑for‑performance signals: Zero STIP payout in 2024; PSU payouts tied to ROIC/Revenue and TSR modifier; Krause’s STIP target remained at 65% with payouts driven strictly by delivered results .

Risk Indicators & Red Flags

• Hedging/pledging: Prohibited for executives (reduces misalignment risk) .
• Option repricing: Prohibited under stock plan (mitigates pay inflation risk) .
• Severance economics: Two‑times cash severance framework; no excise tax gross‑ups .
• Insider selling pressure: Beneficial ownership increased 2023→2025, likely via RSU/PSU vesting; no pledging permitted; Form 4 transaction detail not disclosed here .

Equity Ownership & Alignment (Detail)

Stock ownership guidelines: 3× salary for Senior Executives; five‑year phase‑in; as of Dec 31, 2024, non‑CEO NEOs (including Krause) had additional time to meet guidelines .

Employment Terms (Detail)

• Double‑trigger definition: CoC plus termination without cause/good reason within two years triggers cash severance and benefit eligibility; equity under 2014/2020 stock plans and AIP does not vest solely at CoC (no single‑trigger vesting) .
• Severance multiples and components: Cash = 2× (highest base in past 5 years) + 2× (current target bonus); interrupted bonus equals target or actual (higher) for the year; other benefits include health/welfare, outplacement, financial planning; equity valued per plan rules .
• No employment contracts: Company states it does not provide ongoing employment contracts for executives .

Investment Implications

• Alignment: Strong governance (clawback, no repricing, anti‑hedging/pledging, double‑trigger LTI) and zero STIP payout in 2024 indicate real downside in pay when performance misses, supporting pay‑for‑performance. Krause’s package is mostly equity‑linked (PSUs/RSUs), with ownership trending up and no pledging allowed—low misalignment risk .
• Vesting overhang: Unvested RSUs/PSUs and AIP units create a measured overhang; 2025 AIP hurdles ($70–$130) concentrate upside exposure—monitor price‑trigger proximity for potential vest‑driven supply/demand effects .
• Retention risk: Transition Agreements provide moderate protection (2× cash; no gross‑ups), reducing near‑term departure risk while avoiding shareholder‑unfriendly features .
• Trading signals: 2024 STIP non‑payment and reduced equity CoC values vs prior year reflect tougher operating backdrop; PSU frameworks tied to ROIC/Revenue and TSR may incentivize capital discipline, but investor positioning should consider Hardwire execution, retail demand, and multi‑year targets. Near‑term, lack of STIP payout can be a governance positive but may signal performance headwinds .

Footnote: EBITDA figures marked with * have no document citations and are provided for context; values retrieved from S&P Global*.