Derek Leathers
WERNER ENTERPRISESAbout Derek Leathers
Derek J. Leathers, 55, is Chairman and Chief Executive Officer of Werner Enterprises, serving as CEO since May 2016 and Chairman since May 2021; he joined Werner in 1999 and holds an economics degree from Princeton University . 2024 performance reflected a difficult freight market: revenue fell 8% to $3.03B, operating income fell 63% to $66.1M, EPS declined 69% to $0.55, operating ratio was 97.8%, and TSR was -14.2% (1-year) and -21.7% (3-year cumulative) . CEO pay mix is highly performance-based: 84% variable at target in 2024 (AIP + RS + PS) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Werner Enterprises | Chairman & CEO | Chairman since 2021; CEO since 2016 | Led enterprise through cycles; deep operating knowledge across Werner; governance leadership as combined Chair/CEO . |
| Werner Enterprises | Vice Chairman; President | Vice Chairman 2020–2021; President 2011–Jan 2024 | Oversaw asset operating groups; drove growth and operational execution . |
| Werner Enterprises | Senior leadership (multiple roles) | 1999–2011 | Established Mexico operations; cross-border strategy . |
| Schneider National | Various leadership roles | ~1991–1999 (8 years) | Based in Mexico City; among first foreign CANACAR members; built Mexico expertise . |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| SkyWest Incorporated (public) | Director | Current | Public company airline board service . |
| American Transportation Research Institute (ATRI) | Board Chair | Current | Industry thought leadership . |
| American Trucking Associations (ATA) | Board Vice-Chair | Current | Policy/industry leadership . |
| Greater Omaha Chamber; United Way of the Midlands | Executive Committee | Current | Civic leadership . |
| Creighton University | Board of Trustees | Current | Higher-ed governance . |
| PlaySmart Leadership Academy | Founder & Director | Current | Non-profit youth leadership . |
Fixed Compensation
| Year | Base Salary ($) | Change (%) |
|---|---|---|
| 2023 | 925,000 | — |
| 2024 | 945,000 | 2% |
All Other Compensation (2024 – components)
| Component | Amount ($) |
|---|---|
| Perquisites & other personal benefits (incl. $80,000 personal aircraft use, club membership, company vehicle, medical membership) | 109,697 |
| Company 401(k) contribution | 5,000 |
| ESPP contribution | 3,129 |
| Other (years of service award) | 1,250 |
| Total | 119,076 |
Notes:
- Personal use of corporate aircraft is capped at $100,000 per year at incremental cost; no tax gross-ups .
- No employment agreement; base salary reviewed annually by Compensation Committee .
Performance Compensation
Annual Incentive Plan (AIP) – Design and 2024 Results
| Metric | Weight | 2024 Target | 2024 Actual | Achieved (%) | Payout Contribution |
|---|---|---|---|---|---|
| Operating Income | 40% | $200.0M | $80.7M | 0% | 0% |
| Revenues less fuel surcharge (FSC) | 30% | $2,951.1M | $2,767.0M | 68.8% | 20.6% |
| Individual Performance | 30% | Varies | — | 133%–175% | 39.9%–52.5% |
| Total AIP | 100% | — | — | — | 60.5%–73.1% |
CEO 2024 AIP Outcome
| Base Salary | Target (% Salary) | Target AIP ($) | Actual Payout (% Target) | Actual AIP ($) |
|---|---|---|---|---|
| 945,000 | 125% | 1,181,250 | 73.1% | 863,494 |
Long-Term Incentive (LTI) – 2024 Grants
| Component | Target Value ($) | Vesting | Performance Metric(s) | TSR Modifier | Vest Date |
|---|---|---|---|---|---|
| Restricted Stock | 1,950,000 | 34%/33%/33% annually starting 2/9/2025 | Service only | N/A | 2025–2027 |
| Performance Stock | 1,950,000 | Cliff, subject to earn | 2-year cumulative diluted EPS (2024–2025) | ±25% vs trucking peers (CVLG, HTLD, HUBG, JBHT, KNX, LSTR, MRTN, SNDR) over 3 years | 2/9/2027 |
Historical Performance Share Outcomes (for context)
| Grant Year | Performance Window | Adjustments noted by Committee | Result |
|---|---|---|---|
| 2022 PS | 2022–2023 (EPS), TSR cap to 150%/175% | Adjusted for interest on 2018 verdict, amortization of intangibles, investment gains/losses | Below threshold; 0% payout |
| 2023 PS | 2023–2024 (EPS), ±25% TSR modifier | Adjusted for verdict interest, amortization, investments | Below threshold; 0% payout |
Program Features and Controls
- Clawback policy (effective Dec 1, 2023) applies to incentive-based comp for three completed fiscal years preceding a restatement; equity awards subject to clawback .
- Hedging and pledging of Werner stock by directors/executives prohibited .
- CEO target pay mix: 16% salary, 20% AIP, 32% RS, 32% PS at target (84% variable) .
Equity Ownership & Alignment
| Ownership Detail | Amount |
|---|---|
| Shares owned directly | 148,845 |
| Shares held via GRATs (trustee and sole beneficiary): 2022-A (43,392); 2022-B (81,740); 2023 (29,294); 2024 (85,574) | 240,000 |
| Total beneficial ownership | 388,845 |
| Shares outstanding (as of 3/4/2025) | 61,924,797 |
| Ownership as % of SO | ~0.63% (388,845 / 61,924,797) |
| Executive stock ownership guideline | CEO: 7.0x base salary |
| Compliance status | All execs met guidelines except Wikoff and Mahon (tenure-related); implies CEO in compliance |
| Hedging/Pledging | Prohibited for directors/executives |
Notes:
- No director or executive pledging allowed; mitigates alignment risk .
- Beneficial ownership includes direct and trust-held shares; GRATs are grantor retained annuity trusts controlled by Mr. Leathers .
Employment Terms
| Topic | Key Terms |
|---|---|
| Employment agreement | None; no written employment agreement for NEOs . |
| Change-in-control severance plan (double-trigger) | CIC protection period: 24 months post-CIC; cash severance equals Tier Multiplier (1.5–2.5x) times (base salary + target AIP); benefits continuation during coverage period; equity vests/accelerates on qualifying termination . |
| CEO CIC economics (assumes event 12/31/2024 at $35.92/share) | Cash severance $5,315,625; equity acceleration $4,846,506; perqs/benefits $32,956; total $10,195,087; implied 2.5x multiple based on disclosed amounts . |
| Death/Disability vesting | RS (granted on/after 5/9/2023) vests in full; performance stock evaluates actual performance to date (2024 PS not evaluated given only 1 year elapsed); RS pre-5/9/2023 vests on death, not disability . |
| Retirement treatment | Performance stock remains eligible to vest based on actual performance if “rule of 70” and >12 months since grant; CEO is retirement-eligible; 2024 PS not eligible as of 12/31/2024 due to <12 months . |
Board Governance
- Roles: Combined Chairman & CEO (non-independent); Board believes structure effective given CEO’s depth; mitigated by a Lead Independent Director (Scott C. Arves) with robust authorities (executive sessions, agenda review, shareholder outreach, succession planning) .
- Independence: All directors/nominees independent except Mr. Leathers; all committee members independent .
- Committees and 2024 meetings: Audit (4; Chair Wellman), Compensation (5; Chair Duren), ESG (3; Chair Tapio), Governance (5; Chair Arves); Board met 6 times; four executive sessions of independent directors held in 2024 .
- Attendance: Each incumbent director attended ≥75% of Board/committee meetings; all directors attended 2024 annual meeting .
Director Compensation (as applicable to Leathers’ dual role)
- Only independent directors receive director pay; employee directors (including Mr. Leathers) receive no additional director compensation .
- Independent director equity is in time-vested restricted stock with 3-year vesting; no options used for directors in 2024 .
Compensation Committee, Peer Group, Say-on-Pay
- Compensation Committee: independent; advised by Frederic W. Cook & Co.; no conflicts; uses peer benchmarking but does not peg to fixed percentiles .
- 2024 peer group (truckload/LTL/logistics): ArcBest, Covenant, Daseke, Forward Air, Heartland, Hub Group, J.B. Hunt, Knight-Swift, Landstar, Marten, Old Dominion, Saia, Schneider .
- Say-on-Pay: 89% approval at 2024 annual meeting, supporting program design .
Performance & Track Record (selected metrics under current leadership)
| Metric | 2023 | 2024 | Change |
|---|---|---|---|
| Total Revenues ($000s) | 3,283,499 | 3,030,258 | -8% |
| Operating Income ($000s) | 176,416 | 66,148 | -63% |
| EPS (diluted) ($) | 1.76 | 0.55 | -69% |
| TSR (1-year) | 6.6% | -14.2% | — |
| TSR (3-year cumulative) | 12.0% | -21.7% | — |
Qualitative: Leathers led establishment of Mexico operations and oversight of asset operating groups; decades-long industry experience including CANACAR membership strengthen cross-border execution .
Compensation Structure Analysis
- Alignment: High at-risk mix (84% variable), performance stock tied to multi-year EPS with a relative TSR modifier vs eight trucking peers; clawback policy in place .
- Rigor: 2022 and 2023 performance shares paid 0% (below threshold after Committee-defined adjustments), indicating downside risk in equity program during weak cycles .
- Cash incentives: 2024 AIP paid below target (73.1% for CEO) due to operating income miss despite some revenue and individual-performance credit .
- Perquisites: Limited; aircraft personal use capped ($100k); no tax gross-ups; hedging/pledging prohibited .
Risk Indicators & Red Flags
- Combined Chair/CEO: Potential independence concern mitigated by Lead Independent Director and frequent executive sessions .
- Hedging/Pledging: Prohibited for insiders, reducing misalignment risk .
- Options repricing/gross-ups: None disclosed; no tax gross-ups; no single-trigger severance; CIC is double-trigger .
- Related-party transactions: Board disclosed and evaluated certain director-related vendor relationships; none noted for CEO .
- Pay outcomes vs performance: Multiple PS cycles at 0% suggest discipline; AIP adjustments disclosed transparently (e.g., jury verdict interest and intangible amortization) .
Equity Ownership & Potential Selling Pressure
- Scheduled RS vesting from 2024 grants (34/33/33 beginning Feb 2025) may create periodic supply; 2022–2023 PS tranches earned 0%, reducing near-term PS-related selling .
- CEO holds 388,845 shares (~0.63% of SO), including 240,000 via GRATs; pledging prohibited .
Employment Terms (Severance and CIC Economics)
| Scenario | Cash Severance | Equity Acceleration | Benefits/Perqs | Total |
|---|---|---|---|---|
| Termination without cause / resignation for good reason within 24 months of CIC (double-trigger) | 5,315,625 | 4,846,506 | 32,956 | 10,195,087 |
| Death | — | 3,097,453 | — | 3,097,453 |
| Disability | — | 1,727,034 | — | 1,727,034 |
Assumptions per proxy: 12/31/2024 event date; $35.92 share price; performance share treatment per plan; CEO implied 2.5x multiple on (salary + target AIP) under CIC plan .
Board Service History, Committees, Independence Implications
- Board tenure: Appointed May 2020; elected by stockholders May 2021; current term ends 2026 (Class II) .
- Committees: Mr. Leathers is not seated on standing committees; all committees chaired by independent directors .
- Independence: Board affirmed all directors/nominees independent except CEO/Chair; Lead Independent Director charter delineates robust counterbalances (executive sessions, agenda, investor engagement) .
Investment Implications
- Pay-for-performance alignment is strong: 84% variable pay, rigorous PS metrics with relative TSR, formal clawback; two consecutive PS cycles at 0% reinforce downside exposure in weak macro, reducing windfall risk .
- Retention risk appears contained: meaningful ongoing RS vesting through 2027, CEO equity ownership (~0.63% of SO), and double-trigger CIC with 2.5x multiple provide incentives to remain; hedging/pledging prohibitions and ownership guidelines enhance alignment .
- Governance watch: Combined Chair/CEO warrants monitoring; Lead Independent Director structure and fully independent committees partially mitigate; say-on-pay support (89%) signals shareholder acceptance of program design .
- Trading signal considerations: RS vesting cadence (2025–2027) could create periodic supply; absence of PS payouts in recent cycles tempers incremental selling pressure from performance equity near-term .