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Employee Compensation Plans
 12 Months Ended
Dec. 31, 2011
Employee Compensation Plans [Abstract]  
Employee Compensation Plans

13. Employee Compensation Plans

Share-based Compensation

The Company has share-based compensation plans which are accounted for at fair value in accordance with the applicable accounting guidance. The Company estimates the fair value of share-based awards using the Black-Scholes option-pricing model and applies to it a forfeiture rate based on historical experience. The accuracy of this forfeiture rate is reviewed at least annually for reasonableness. Key input assumptions used to estimate the fair value of share-based awards include the expected term and the expected volatility of the Company’s Class A Stock over the term of the award, the risk-free interest rate over the expected term, and the Company’s expected annual dividend yield. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating fair values of the Company’s outstanding unvested share-based awards. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive share-based awards.

The fair value of each award of stock options was estimated on the grant date using the Black-Scholes option- pricing model with the following assumptions:

 

    September 30,   September 30,   September 30,   September 30,   September 30,   September 30,
    Grant date assumptions
    2011   2010   2009   2008   2007   2006
             

Expected term (1)

   5 years   4.5 years   5 years   2.4 years   5 years   5 years

Expected volatility factor (2)

   52.52%   48.58%   39.17%   36.41%   39.67%   26.57%

Risk-free interest rate (3)

   2.00%   2.62%   3.32%   2.13%   4.54%   4.51%

Actual dividends (4)

   $0.44   $0.44   $0.44   $0.44   $0.40   $0.38

 

(1)

The expected term was determined based on actual awards.

 

(2)

The volatility factor was measured using the weighted average of historical daily price changes of the Company’s Class A Stock over a historical period commensurate to the expected term of the awards.

 

(3)

The risk-free interest rate was based on periods equal to the expected term of the awards based on the U.S. Treasury yield curve in effect at the time of grant.

 

(4)

Actual dividends were used to compute the expected annual dividend yield.

 

Equity Incentive Plan

Under the Company’s 2006 Equity Incentive Plan, adopted December 11, 2006 and amended December 2011, subject to stockholder approval, and its 1996 Equity Incentive Plan, as amended March 10, 2005 (together “EIP”), the Compensation Committee of the Board of Directors of the Company may grant options to purchase Class A Stock, Class A Stock awards and restricted Class A Stock awards to officers and key employees of the Company and its subsidiaries. Grants of options were made to the Company’s non-employee directors on a formula basis through 2011. Except in 2008, options are generally granted for a five-year term and generally vest at the rate of 25% of the amount granted on the second anniversary of the grant, 25% on the third anniversary of the grant, 25% on the fourth anniversary of the grant and 25% six months before expiration. In 2008, options were generally granted for a three year term and generally vested at the rate of 33% of the amount granted on both the first and second anniversary of the grant and 33% three months before expiration.

Stock option activity under the EIP since January 1, 2010 is summarized as follows.

 

      September 30,       September 30,       September 30,       September 30,  
    Year ended
December 31, 2011		     Year ended
December 31, 2010		  
    Number of
shares		     Weighted
average
exercise
price		     Number of
shares		     Weighted
average
exercise
price		  
         

Options outstanding, beginning of year

     284,976     $ 34.39       420,707     $ 31.82  

Options granted

     37,333     $ 26.18       17,799     $ 31.93  

Options exercised

     (13,532 )    $ 24.88       (101,500 )    $ 22.80  

Options forfeited or expired

     (144,584 )    $ 39.24       (52,030 )    $ 35.35  
   

 

 

    

 

 

    

 

 

    

 

 

  

Options outstanding, end of year

     164,193     $ 29.04       284,976     $ 34.39  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Options vested, end of year

     87,279     $ 32.86       196,314     $ 37.53  
   

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average fair value of options granted during the year

   $ 10.89       —       $ 12.97       —    
   

 

 

    

 

 

    

 

 

    

 

 

  

The aggregate intrinsic value of options outstanding as of December 31, 2011 was $102,800. The aggregate intrinsic value of vested options as of December 31, 2011 was $25,700. The aggregate intrinsic value of options that are expected to vest is $100,800 as of December 31, 2011.

The following table summarizes stock options outstanding and exercisable as at December 31, 2011.

 

      September 30,       September 30,       September 30,       September 30,       September 30,  

Range of exercise

prices

   Number
outstanding		     Weighted
average
remaining
contractual
life		     Weighted
average  exercise
price
of outstanding
options		     Number
exercisable
(vested)		     Weighted
average
exercise
price of
vested
options		  
           

$9.60 – $25.00

     29,864       2.30 years     $ 13.46       6,791     $ 12.31  

$25.01 – $39.45

     134,329       1.56 years     $ 32.50       80,488     $ 35.17  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

$9.60 – $39.45

     164,193       1.70 years     $ 29.04       87,279     $ 32.86  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table summarizes the status of the Company’s non-vested options for the year ended December 31, 2011.

 

      September 30,       September 30,  
    Year ended December 31, 2011  
    Number of
Options		     Weighted
average fair
value		  
     

Non-vested beginning of year

     88,663     $ 9.68  

Granted

     37,333     $ 10.89  

Vested

     (49,082 )    $ 11.58  

Forfeited or expired

     —         —    
   

 

 

          

Non-vested end of year

     76,914     $ 8.88  
   

 

 

          

In the year ended December 31, 2011, the Company has included approximately $322,500 ($554,000 in 2010 and $1.2 million in 2009) of compensation expense in its consolidated statement of operations relating to the expensing of stock options.

As of December 31, 2011, there was approximately $472,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the EIP. The cost is expected to be recognized over a weighted average period of 3.6 years.

Employee Share Plan

On March 10, 2005, the Company approved the Oppenheimer & Co. Inc. Employee Share Plan (“ESP”) for employees of the Company and its subsidiaries resident in the U.S. to attract, retain and provide incentives to key management employees. The Compensation and Stock Option Committee of the Board of Directors of the Company may grant stock awards and restricted stock awards pursuant to the ESP. ESP awards are being accounted for as equity awards and valued at grant date fair value. ESP awards are generally awarded for a three or five year term and 100% vest at the end of the term.

The Company has awarded restricted Class A Stock to certain employees as part of their compensation package pursuant to the ESP. These awards are granted from time to time throughout the year based upon the recommendation of the Compensation Committee of the Board of Directors of the Company. These ESP awards are priced at fair value on the date of grant and typically require the completion of a service period (determined by the Compensation Committee). Dividends may or may not accrue during the service period, depending on the terms of individual ESP awards.

The following table summarizes the status of the Company’s non-vested ESP awards for the year ended December 31, 2011.

 

      September 30,       September 30,       September 30,  
    Number of shares
of Class A Stock
subject to ESP
awards		     Weighted
average  fair
value		     Remaining
contractual
life		  

Non-vested beginning of year

     887,811     $ 26.34       1.8 years  

Granted

     299,500     $ 23.78       3.6 years  

Vested

     (416,409 )    $ 35.09       —    

Forfeited or expired

     (10,000 )    $ 23.57       —    
   

 

 

    

 

 

    

 

 

  

Non-vested end of year

     760,902     $ 20.94       2.8 years  
   

 

 

    

 

 

    

 

 

  

 

At December 31, 2011, all outstanding ESP awards were non-vested. The aggregate intrinsic value of ESP awards outstanding as of December 31, 2011 was approximately $12.3 million. The aggregate intrinsic value of ESP awards that are expected to vest is $8.9 million as of December 31, 2011. In the year ended December 31, 2011, the Company included approximately $3.7 million ($7.1 million in 2010 and $5.9 million in 2009) of compensation expense in its consolidated statements of operations relating to ESP awards.

As of December 31, 2011, there was approximately $9.4 million of total unrecognized compensation cost related to unvested ESP awards. The cost is expected to be recognized over a weighted average period of 2.8 years.

At December 31, 2011, the number of shares of Class A Stock available under the EIP and the ESP, but not yet awarded, was 389,015.

On January 3, 2012, the Company awarded 13,200 restricted shares of Class A Stock to its independent directors under the EIP (subject to stockholder approval of an amendment to the EIP at the 2012 Annual Meeting of Stockholders). These shares of Class A Stock will vest as follows: 25% on July 1, 2012 and 25% on the next three anniversaries of the initial grant date.

On January 26, 2012, the Company awarded a total of 1,590 options to purchase Class A Stock to current employees pursuant to the EIP. These options will be expensed over 4.5 years (the vesting period).

On February 23, 2012, the Company awarded 76,000 restricted shares of Class A Stock to employees under the ESP. These shares will vest on February 22, 2017, provided that the employee continues to be continuously employed by the Company until the date of vesting.

Stock Appreciation Rights

The Company has awarded Oppenheimer stock appreciation rights (“OARs”) to certain employees as part of their compensation package based on a formula reflecting gross production and length of service. These awards are granted once per year in January with respect to the prior year’s production. The OARs vest five years from grant date and will be settled in cash at vesting. The OARs are being accounted for as liability awards and are revalued on a monthly basis. The adjusted liability is being amortized on a straight-line basis over the vesting period.

The fair value of each OARs award was estimated as at December 31, 2011 using the Black-Scholes option-pricing model.

 

      September 30,       September 30,       September 30,       September 30,  

Grant date

   Number of
OARs
outstanding		     Strike price     Remaining
contractual  life		     Fair value as  at
December 31, 2011		  

January 12, 2007

     295,110     $ 35.44       12 days     $ —    

January 10, 2008

     391,445     $ 37.78       1 year     $ 0.34  

January 12, 2009

     367,640     $ 12.74       2 years     $ 6.00  

January 19, 2010

     301,790     $ 30.68       3 years     $ 3.01  

January 13, 2011

     402,240     $ 26.35       4 years     $ 4.18  
   

 

 

                          

Total

     1,758,225                          
   

 

 

                          

Total weighted average values

           $ 28.32       2.6 years     $ 2.80  

At December 31, 2011, all outstanding OARs were unvested. At December 31, 2011, the aggregate intrinsic value of OARs outstanding and expected to vest was $1.2 million. In the year ended December 31, 2011, the Company included a net credit of approximately $2.9 million (a net credit of $3.4 million in 2010 and $10.2 million of expense in 2009) in compensation expense in its consolidated statement of operations relating to OARs awards. The liability related to the OARs was approximately $2.0 million as of December 31, 2011.

 

As of December 31, 2011, there was approximately $2.7 million of total unrecognized compensation cost related to unvested OARs. The cost is expected to be recognized over a weighted average period of 2.6 years.

On January 18, 2012, 438,070 OARs were awarded to Oppenheimer employees related to fiscal 2011 performance. These OARs will be expensed over 5 years (the vesting period).

Defined Contribution Plan

The Company, through its subsidiaries, maintains a defined contribution plan covering substantially all full-time U.S. employees. The Oppenheimer & Co. Inc. 401(k) Plan provides that Oppenheimer may make discretionary contributions. Eligible Oppenheimer employees may make voluntary contributions which may not exceed $16,500, $16,500 and $15,500 per annum in 2011, 2010 and 2009, respectively. The Company made contributions to the 401(k) Plan of $1.9 million, $3.5 million, and $2.5 million in 2011, 2010 and 2009, respectively.

Deferred Compensation Plans

The Company maintains an Executive Deferred Compensation Plan (“EDCP”) and a Deferred Incentive Plan (“DIP”) in order to offer certain qualified high-performing financial advisers a bonus based upon a formula reflecting years of service, production, net commissions and a valuation of their clients’ assets. The bonus amounts resulted in deferrals in fiscal 2011 of approximately $6.8 million ($7.0 million in 2010 and $5.8 million in 2009). These deferrals normally vest after five years. The liability is being recognized on a straight-line basis over the vesting period. The EDCP also includes voluntary deferrals by senior executives that are not subject to vesting. The Company maintains a Company-owned life insurance policy, which is designed to offset approximately 60% of the EDCP liability. The EDCP liability is being tracked against the value of a phantom investment portfolio held for this purpose. At December 31, 2011, the Company’s liability with respect to the EDCP and DIP totaled $36.8 million and is included in accrued compensation on the consolidated balance sheet at December 31, 2011.

In addition, the Company is maintaining a deferred compensation plan on behalf of certain employees who were formerly employed by CIBC World Markets. The liability is being tracked against the value of an investment portfolio held by the Company for this purpose and, therefore, the liability fluctuates with the fair value of the underlying portfolio. At December 31, 2011, the Company’s liability with respect to this plan totaled $13.2 million.

The total amount expensed in 2011 for the Company’s deferred compensation plans was $5.5 million ($11.0 million in 2010 and $12.5 million in 2009).