J.C. Butler, Jr.
About J.C. Butler, Jr.
- President & CEO of NACCO Industries, Inc. and NACCO Natural Resources (NNR); Director of NACCO since 2017; Age 64 .
- External public company directorships: Hyster‑Yale, Inc. (Director) and Hamilton Beach Brands Holding Company (Director); industry leadership: Board of the National Mining Association; Management Committee member of the Lignite Energy Council .
- Pay-for-performance alignment: ~72% of Mr. Butler’s 2024 target total compensation was variable/“at risk” and tied to company performance . The company links compensation “actually paid” to consolidated operating profit and consolidated ROTCE .
- Performance context (Pay vs Performance table): 2022–2024 TSR values on a $100 initial investment were $106.75 (2022), $105.13 (2023), and $88.40 (2024); Net Income was $74.158M (2022), $(39.587)M (2023), and $33.741M (2024) .
- Say-on-Pay support: ~94% approval at the 2024 annual meeting; excluding founding family shares, ~89% approval .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| NACCO / NNR | Senior management roles; President & CEO of NACCO and NNR (CEO service “from prior to 2020 to present”) | 25+ years in senior management; CEO since before 2020 | Extensive knowledge of operations and strategies from long-tenured senior management service |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Hyster‑Yale, Inc. | Director | Prior to 2020 – present | Cross-industry governance experience benefiting strategy and oversight |
| Hamilton Beach Brands Holding Co. | Director | Prior to 2020 – present | Consumer/industrial insights and board governance |
| National Mining Association | Board Member | Prior to 2020 – present | Industry advocacy and policy engagement |
| Lignite Energy Council | Management Committee Member | Prior to 2020 – present | Sector expertise and regional stakeholder alignment |
| Midwest AgEnergy Group | Director | Prior to 2020 – 2022 | Energy transition/operations perspective (ethanol) |
Fixed Compensation
| Metric | 2023 | 2024 |
|---|---|---|
| Base Salary ($) | $871,544 | $907,515 (includes $35,000 perquisite allowance) |
| 2024 Base Salary Rate vs Midpoint | — | $872,515 (101% of $865,100 midpoint); +4.3% YoY; $35,000 cash in lieu of perquisites |
| Bonus ($) | $171,308 (Excess Plan “make‑whole”) | $138,040 (Excess Plan “make‑whole”) |
| All Other Compensation ($) | $226,700 | $234,354 |
| Total Compensation ($) | $4,304,928 | $4,957,496 |
Target total compensation design (2024): Salary midpoint $865,100 (26%); perquisites $35,000 (1%); Short‑Term Plan target $778,590 (24%); Long‑Term Plan target $1,591,784 (49%); total target $3,270,474 .
Performance Compensation
Short‑Term Incentive Plan (STIP) – 2024
| Metric | Weight | Target | Cap | Actual/Result | Achievement | Payout Contribution |
|---|---|---|---|---|---|---|
| Consolidated Operating Profit | 30% | $23,057,630 | 200% | $27,760,164 | 110.2% | 33.1% |
| Project Focus List | 20% | — | 125% | — | 106.7% | 21.3% |
| MLMC Performance Factor | 5% | — | 125% | — | 110.0% | 5.5% |
| Special Project Award | 15% | — | N/A | — | 313.4% | 47.0% |
| Safety Incident Report Index | 15% | 50% of National Avg | 150% | 61.4% | 77.2% | 11.6% |
| MSHA/OSHA Violations | 5% | 50% of National Avg | 150% | 26.7% | 123.3% | 6.2% |
| Environmental Citations | 10% | Zero citations/location | 150% | — | 103.8% | 10.4% |
| Final Payout % | — | — | 150% (plan cap) | — | — | 135.1% |
- CEO STIP target: 90% of salary midpoint = $778,590; actual payout: 135.1% = $1,051,875 .
Long‑Term Incentive (LTI) – 2024 Plan and 2025 Grant Settlement
Plan structure and payout math:
- LTI targets are a % of salary midpoint, increased 15% to account for immediate taxation; awards are denominated in dollars and paid ~35% in cash and ~65% in immediately vested restricted stock, subject to a 10‑year transfer restriction for NEOs; all awards vest at grant but cannot be transferred during the restriction period; no stock options granted .
- CEO LTI target 2024: $1,591,784 (184% of midpoint); payout achieved 158.3%; cash‑denominated payout $2,519,794; fair market value of LTI payout $2,607,127 .
Grants of plan‑based awards (as disclosed at 2/18/2025 grant):
| Component | Target | Maximum | Grant Date FV |
|---|---|---|---|
| LTI – Cash (non‑equity portion) | $557,124 | $1,114,249 | — |
| LTI – Equity (restricted stock) | $1,034,660 | $2,069,319 | $1,725,191 |
Stock issued/settled (2024 performance, granted 2/18/2025):
- Shares acquired on vesting (net after share surrender for taxes): 48,848; value realized: $1,570,952 based on $32.160 average of high/low on grant date .
- Before net share surrender, Butler received 53,644 shares with fair market value of $1,725,191 .
Multi‑Year Compensation Mix and Governance
| Item | 2024 |
|---|---|
| Performance‑based portion of NEO compensation (program‑level) | ~74% |
| CEO at‑risk share of target total compensation | >72% |
| Use of TSR as a metric | Not used; company cites thin trading and focus on operating performance |
Equity Ownership & Alignment
Beneficial ownership (March 5, 2025):
| Class | Sole Voting/Investment | Shared Voting/Investment | Aggregate | % of Class |
|---|---|---|---|---|
| Class A Common | 369,738 | 407,841 | 777,579 | 13.25% |
| Class B Common | — | 1,085,538 | 1,085,538 | 69.35% |
Ownership notes and pledging/hedging:
- Restricted stock awards for NEOs are immediately vested but generally subject to a 10‑year transfer restriction; participants have full shareholder rights during the holding period .
- Hedging is prohibited for officers/directors; pledging of non‑restricted shares is permitted only with prior approval; restricted shares may not be hedged during restriction period .
- Butler disclaims beneficial ownership of certain Class A holdings (e.g., 338,295 shares held by Rankin Associates II, L.P.; 2,064 shares held by AMR Associates NC; 67,482 shares held by spouse; 8,010 shares in children’s trusts). A GST trust for spouse pledged 2,191 Class A shares for estate planning purposes .
- Butler also disclaims beneficial ownership of certain Class B holdings (e.g., 472,371 shares held by Rankin I; 400,000 by Rankin IV; 203,972 by AMR Associates NC; spouse’s 9,195 shares). A GST trust for spouse pledged 13,498 Class B shares for estate planning .
Implications for selling pressure and alignment:
- 10‑year transfer restrictions create long‑dated alignment and limit near‑term saleability; share surrenders for tax withholding at grant mitigate open‑market selling at issuance .
- Pledging is allowed with approval; limited pledges by spouse‑related trusts exist, which can be a governance sensitivity point despite not being the CEO’s directly pledged shares .
Employment Terms
- No individual employment, severance, or standalone change‑in‑control agreements for NEOs; severance governed by broad‑based plans generally available to salaried employees .
- Limited change‑in‑control benefits for all employees: pro‑rated target awards for the year of change in control and payment of accrued non‑qualified retirement benefits; no excise tax gross‑ups .
- Estimated potential payments upon a hypothetical change in control on 12/31/2024: Butler $2,370,374 .
- Clawback policy adopted Nov 7, 2023, compliant with SEC/NYSE rules; applies to incentive compensation upon financial restatement .
- Retirement and deferred comp: Defined contribution plans (match 5% of compensation; profit sharing 6.0% and 5.7% above the Social Security Wage Base); Excess Plan credits interest (based on Vanguard Retirement Savings Trust; 14% max) and increases certain credits by 15% to reflect immediate taxation timing .
Board Governance
- Board composition and independence: NACCO may be viewed as having characteristics of a “controlled company” due to Rankin/Taplin family ownership but does not use NYSE controlled‑company exemptions; majority‑independent board; CHC, Audit Review, and NCG committees are fully independent .
- Committee memberships (2024): Butler serves on the Executive Committee; not a member of Audit Review, CHC, or NCG committees .
- Non‑Executive Chairman: Alfred M. Rankin, Jr. (separation of Chair/CEO roles); executive sessions of non‑management directors typically held after regular board meetings .
- Attendance: In 2024, all current directors attended >75% of board and committee meetings; the board held four meetings in 2024 .
- Related‑party context: Butler is the son‑in‑law of Non‑Executive Chairman Alfred M. Rankin, Jr.; related‑person transactions are reviewed/approved by the Audit Review Committee under a defined policy .
Compensation Benchmarks, Say‑on‑Pay, and Committee Practices
- Benchmarking: Korn Ferry General Industry survey (excluding retail/finance), targeting ~50th percentile; company cites diversified operations as rationale for not using a narrow industry peer group .
- CHC Committee and consultant: CHC is independent; Korn Ferry advises and conducts triennial market analyses; independence reviewed; no conflicts found (noting one director serves on Korn Ferry’s board) .
- Say‑on‑Pay: ~94% approval at 2024 meeting; excluding founding family shares ~89%; eight consecutive years >85% approval .
Director Service Details and Dual‑Role Implications
- NACCO Director since 2017; currently CEO and director; board chaired by a Non‑Executive Chairman (Alfred M. Rankin, Jr.), mitigating CEO/Chair concentration risks; Butler is not on key independent committees (Audit, CHC, NCG) .
- Independence considerations: as CEO and a family relative of the Non‑Executive Chairman, Butler is not independent; the board nevertheless maintains majority independence and fully independent key committees .
Investment‑Grade Compensation Tables
Summary Compensation (PEO)
| Component ($) | 2023 | 2024 |
|---|---|---|
| Salary | $871,544 | $907,515 |
| Bonus (Excess Plan make‑whole) | $171,308 | $138,040 |
| Stock Awards (Grant Date FV) | $1,368,515 | $1,725,191 |
| Non‑Equity Incentive Plan (STIP + LTI cash) | $1,648,124 | $1,933,811 |
| Chg in Pension/Non‑qualified Earnings | $18,737 | $18,585 |
| All Other Compensation | $226,700 | $234,354 |
| Total | $4,304,928 | $4,957,496 |
STIP Target and Outcome (2024)
| Item | Value |
|---|---|
| STIP Target (% of Salary Midpoint) | 90% |
| STIP Target ($) | $778,590 |
| Payout as % of Target | 135.1% |
| STIP Paid ($) | $1,051,875 |
LTI Target and Outcome (2024 performance)
| Item | Value |
|---|---|
| LTI Target as % of Midpoint | 184.0% |
| LTI Target ($) | $1,591,784 |
| LTI Payout as % of Target | 158.3% |
| Cash‑Denominated LTI Payout ($) | $2,519,794 |
| Fair Market Value of LTI Payout ($) | $2,607,127 |
| Equity Grant Date (settlement) | Feb 18, 2025 |
| Shares Received (net after tax surrender) | 48,848 |
| Value Realized on Vesting | $1,570,952 (at $32.160) |
| Shares Before Net Surrender | 53,644; Grant‑date FV $1,725,191 |
Beneficial Ownership (March 5, 2025)
| Security | Aggregate Shares | % of Class | Notes |
|---|---|---|---|
| Class A Common | 777,579 | 13.25% | Includes sole 369,738 and shared 407,841; certain interests disclaimed; spouse‑trust GST pledged 2,191 |
| Class B Common | 1,085,538 | 69.35% | Beneficially owned via family partnerships/trusts; certain interests disclaimed; spouse‑trust GST pledged 13,498 |
Pay Versus Performance (Selected Lines)
| Year | PEO SCT Total ($) | PEO Compensation Actually Paid ($) | TSR Value of $100 | Net Income ($) |
|---|---|---|---|---|
| 2022 | $5,339,431 | $5,306,512 | $106.75 | $74,158,000 |
| 2023 | $4,304,928 | $4,395,683 | $105.13 | $(39,587,000) |
| 2024 | $4,957,496 | $4,831,969 | $88.40 | $33,741,000 |
Risk Indicators & Red Flags
- Family control and related‑party ties: Butler is son‑in‑law of Non‑Executive Chairman; combined director/officer group holds 68.83% of combined voting power; related‑person transactions overseen by Audit Review Committee .
- Pledging risk: Pledging requires prior approval; spouse‑related trusts pledged limited Class A and B shares for estate planning, noted in ownership footnotes .
- No option repricing; no stock options outstanding/granted in 2024 .
- Clawback policy in place; change‑in‑control benefits limited; no excise tax gross‑ups .
Compensation Committee Analysis
- CHC Committee fully independent; uses Korn Ferry; targets median (50th percentile) market positioning; conducts annual risk assessment of compensation programs; 2024 assessment concluded programs are not reasonably likely to have a material adverse effect .
Equity Plan Mechanics and Vesting Pressure
- All awards are based on a one‑year performance period and fully vest at grant; however, a 10‑year transfer restriction for NEOs materially reduces near‑term sell pressure and enforces long‑term exposure to stock price performance .
- Shares can be released earlier under limited circumstances (death/disability; retirement after three years or earlier with CHC approval), but no early releases were requested or granted in 2024 .
Employment & Contracts
- No fixed‑term employment agreement; severance only via broad‑based plans; limited change‑in‑control payments (pro‑rated target awards), with CEO estimated at $2.37M under 2024 targets .
Investment Implications
- Strong pay-performance design, but not TSR‑linked: Compensation ties to operating profit and ROTCE; TSR is not used due to thin trading and emphasis on controllable operations, which may underweight market outcomes but aligns with operational value creation .
- Long‑duration alignment, low near‑term sell pressure: Immediate vesting combined with a 10‑year transfer restriction drives high skin‑in‑the‑game and deferred liquidity, favoring long‑term strategic execution; share withholding for taxes reduces market overhang at grant .
- Governance sensitivities mitigated but present: Separation of Chair/CEO roles and independent committees counterbalance controlled‑company characteristics and family ties; related transactions are reviewed under policy, but familial control remains a key governance consideration .
- Change‑in‑control economics modest: No individual employment/severance agreements; pro‑rated target awards and no tax gross‑ups limit windfalls and retention distortions; estimated CEO COC value of ~$2.37M is moderate relative to total pay .
- Share pledging oversight: Hedging banned; pledging allowed with approval; limited pledges by spouse‑related trusts warrant continued monitoring given potential lender‑driven dynamics if credit conditions tighten .
- Shareholder support remains high: 94% 2024 Say‑on‑Pay (89% excluding family shares) indicates broad investor acceptance of the program structure and outcomes .