Douglas C. Yearley, Jr.

About Douglas C. Yearley, Jr.

Douglas C. Yearley, Jr. is Chairman and CEO of Toll Brothers, Inc., serving as CEO since June 2010 and Chairman since October 2018. He joined Toll Brothers in 1990 (land acquisitions and project finance), became an officer in 1994, and progressed through Senior VP, Regional President, and EVP roles; prior to Toll Brothers he practiced law in New Jersey as a commercial litigator. He was named to Barron’s Top 25 CEOs in 2024, reflecting execution on a multi‑year strategy that delivered record FY2024 results: home sales revenue $10.6B, diluted EPS $15.01, ROE on beginning equity 23.1%, deliveries 10,813, homebuilding gross margin 26.6%, and operating margin 18.8% .

Key operating performance during his tenure (selected recent years):

Past Roles

External Roles

Fixed Compensation

Notes:

• Base salaries are approved and paid on a calendar year basis; reported fiscal year amounts reflect timing conventions .
• SERP increases are formulaic once service milestones are reached (post‑age thresholds) .

Performance Compensation

Structure and weightings (unchanged across FY2022–FY2024):

• Annual Incentive Bonus: 100% based on Adjusted Pre‑Tax Income (“PTI”) metric with qualitative overlay (70% formulaic PTI, 30% qualitative) .
• Long‑Term Incentives: 50% RSUs (4‑year ratable vest; delivery generally on 4th anniversary), 50% PRSUs: 2/3 “Ops PRSUs” (one‑year performance on Units Delivered and Adjusted Gross Margin; 4‑year ratable vest and delivery on 4th anniversary) and 1/3 “ROE PRSUs” (three‑year ROE performance; cliff vest at end of period) .

FY2024 outcomes:

FY2023 outcomes:

FY2022 outcomes:

Design safeguards:

• No guaranteed bonuses; clawback policy compliant with SEC/NYSE Section 303A.14; double‑trigger vesting on change‑in‑control; option repricing prohibited; hedging and pledging prohibited .

Equity Ownership & Alignment

Policies:

• Hedging and pledging of Company shares are prohibited for executives/directors .
• RSU delivery deferrals to 4th anniversary reinforce long‑term alignment and may temper near‑term selling pressure .

Employment Terms

Deferred Compensation and Retirement:

• Nonqualified Deferred Compensation Plan (amended 2015) permits deferrals; Yearley participates .
• SERP provides competitive retirement benefits; change‑of‑control triggers lump sum vesting .

Board Governance

Board service history and dual‑role implications:

• Director since June 2010; Chairman since October 2018; not independent under NYSE rules .
• Lead Independent Director in place: Paul E. Shapiro (to March 2024) ; Scott D. Stowell since March 2024, with robust duties (executive sessions, evaluations, liaison) .
• Rationale for combined Chair/CEO: Board emphasizes Yearley’s industry and Company expertise, strong committee structure of independent directors, and independent leadership via Lead Director .

Committees and attendance:

• Yearley does not serve on board committees; all committees are fully independent .
• Attendance: All incumbent directors attended each regular Board meeting and at least 90% of Board/Committee meetings in FY2024 and FY2023; independent directors held regular executive sessions .

Director compensation (context for governance quality):

• Non‑executive directors: Annual board retainer $260,000 (approx. $85,000 cash + $175,000 RSUs); committee retainers; Lead Independent Director cash retainer $35,000; RSUs vest on first anniversary (post‑Dec 2023 grants) .
• Yearley, as an executive director, is not separately compensated for director service; compensation appears in executive SCT .

Board refreshment and independence:

• Majority of board turnover since March 2018; enhanced diversity and skills .
• Categorical independence standards applied annually; all nominees except Yearley are independent .

Director Compensation (Board program overview)

Compensation Committee Analysis

• Independent consultant (Compensation Advisory Partners LLC) advises the Compensation Committee; no other services provided; annual independence review found no conflicts .
• Peer group for FY2024 included large public homebuilders; for FY2025 MDC removed (taken private) and M/I Homes added; committee does not target a specific percentile for pay .

Say‑on‑Pay & Shareholder Feedback

Ongoing outreach to investors representing well over half of outstanding shares (FY2023–FY2025) .

Compensation Structure Analysis

• Mix: Over 90% of CEO compensation at‑risk in FY2024; approx. 64–65% of targeted TDC in performance‑based equity (PRSUs) in FY2023–FY2024 .
• Shift from TSR to ROE PRSUs beginning Dec 2020 to enhance management control over value creation (capital efficiency focus) .
• No option repricing; double‑trigger vesting only; clawbacks updated; hedging/pledging prohibited .

Risk Indicators & Red Flags

• Strong governance mitigants: independent committees, lead independent director, majority voting and resignation policy, clawbacks, no tax gross‑ups, no hedging/pledging .
• Pay outcomes aligned with performance levels (e.g., Ops PRSUs and ROE PRSUs payouts track metrics), with adjustments excluding unbudgeted land sale profit in FY2024 to maintain equitable PTI bonuses .

Employment Terms

See table above; at‑will employment; severance plan with defined “cause” and “good reason” standards; non‑interference covenants post‑termination .

Investment Implications

• Alignment: High proportion of at‑risk, metric‑linked pay (PTI, Units, Margin, ROE) and four‑year RSU/PRSU delivery mechanics align Yearley’s incentives with sustained margin/volume execution and capital efficiency, reducing near‑term sell pressure via delivery deferrals .
• Performance momentum: FY2024 records across revenue, EPS, ROE, contracts and community count reflect operational efficiency and spec strategy; ROE PRSU design ties pay to three‑year returns, supporting value creation .
• Governance: Dual Chair/CEO structure offset by strong Lead Independent Director role and fully independent committees; say‑on‑pay support ≥95% over five years indicates investor endorsement of pay program .
• Retention risk: Robust severance protections and SERP benefits (incremental with service) plus ownership guidelines/pledging ban likely stabilize retention; however, decreasing reported beneficial ownership percentage (<1% in 2025) vs >1% previously warrants monitoring of future Form 4 activity to assess potential selling pressure .