UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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Filed by a Party other than the Registrant  o

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þ  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material Pursuant to Rule 14a-12

OPPENHEIMER HOLDINGS INC.

(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

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OPPENHEIMER HOLDINGS INC.
P.O. Box 2015, Suite 1110

20 Eglinton Avenue West

Toronto, Ontario

M4R 1K8

 

 

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

 

 

To the Shareholders:

 

NOTICE IS HEREBY GIVEN that an Annual and Special Meeting of Shareholders of OPPENHEIMER HOLDINGS INC. (the “Corporation”) will be held at The Toronto Board of Trade Downtown Centre, 4th Floor, 1 First Canadian Place, 77 Adelaide St. West, Toronto, Ontario, Canada on May 14, 2007, at the hour of 4:30 p.m. (Toronto time) for the following purposes:

 

 

Holders of Class A non-voting shares of the Corporation are entitled to attend and speak at the Annual Meeting of Shareholders. Holders of Class A non-voting shares are not entitled to vote with respect to the matters referred to above.

 

Holders of Class B voting shares who are unable to attend the meeting in person are required to date, sign and return the enclosed form of proxy for use by holders of Class B voting shares. Reference is made to the accompanying Management Proxy Circular for details of the matters to be acted upon at the meeting and with respect to the respective voting rights of the holders of the Class A non-voting shares and the Class B voting shares.

 

DATED at Toronto, Ontario this 14th day of March, 2007.

 

(signed) A.W. OUGHTRED

Secretary

MANAGEMENT PROXY CIRCULAR

 

 

TABLE OF CONTENTS

 

 

 

All dollar amounts expressed herein are U.S. dollars.

OPPENHEIMER HOLDINGS INC.

 

 

MANAGEMENT PROXY CIRCULAR

 

(All dollar amounts expressed herein are U.S. dollars)

 

 

This Management Proxy Circular (the “Circular”) is forwarded to holders of Class B voting shares (the “Class B Shares”) and Class A non-voting shares (the “Class A Shares”) of Oppenheimer Holdings Inc. (the “Corporation”) in connection with the solicitation of proxies by the management of the Corporation from the holders of the Class B Shares for use at the Annual and Special Meeting of Shareholders of the Corporation (the “Meeting”) to be held on May 14, 2007, at the hour of 4:30 p.m. (Toronto time) at The Toronto Board of Trade Downtown Centre, 4th Floor, 1 First Canadian Place, 77 Adelaide St. West, Toronto, Ontario, Canada and at any adjournments thereof for the purposes set forth in the Notice of Meeting of Shareholders (the “Notice of Meeting”) which accompanies this Circular. This Circular is dated March 14, 2007 and is first being mailed to Shareholders on or about March 28, 2007.

 

The record date for the determination of shareholders entitled to receive notice of the meeting is March 14, 2007. In accordance with the provisions of the Canada Corporations Act the Corporation will prepare a list of holders of Class B Shares (“Class B Shareholders”) as of the record date. Class B Shareholders named in the list will be entitled to vote the Class B Shares on all matters to be voted on at the Meeting except to the extent that (a) the shareholder has transferred any of the shareholder’s Class B Shares after the record date and (b) the transferee of those shares produces properly endorsed share certificates or otherwise establishes that the transferee owns such shares and demands, not later than immediately before a vote on any matter, that the transferee’s name be included in the list, in which case the transferee of the Class B Shares will be entitled to vote such shares at the Meeting.

 

It is planned that the solicitation will be initially by mail, but proxies may also be solicited by employees of the Corporation. The cost of such solicitation, estimated to be approximately $25,000, will be borne by the Corporation.

 

No person is authorized to give any information or to make any representation other than those contained in this Circular and, if given or made, such information or representation should not be relied upon as having been authorized by the Corporation. The delivery of this Circular shall not, under any circumstances, create an implication that there has not been any change in the information set forth herein since the date of this Circular. Except as otherwise stated, the information contained in this Circular is given as of March 14, 2007.

 

The Corporation has distributed copies of its Annual Report for the year ended December 31, 2006, the Notice of Meeting, this Circular, and, in the case of Class B Shareholders, a form of proxy for use by the Class B Shareholders to intermediaries such as clearing agencies, securities dealers, banks and trust companies or their nominees for distribution to non-registered shareholders of the Corporation whose shares are held by or in the custody of such intermediaries. Intermediaries are required to forward these documents to non-registered Class B Shareholders. The solicitation of proxies from non-registered Class B Shareholders will be carried out by the intermediaries, or by the Corporation if the names and addresses of Class B Shareholders are provided by the intermediaries. The cost of such solicitation will be borne by the Corporation. Non-registered Class B Shareholders who wish to file proxies should follow the instructions of their intermediary with respect to the procedure to be followed. Generally, non-registered Class B Shareholders will either: (a) be provided with a proxy executed by the intermediary, as the registered shareholder, but otherwise uncompleted and the non-registered holder may complete the proxy and return it directly to the Corporation’s transfer agent; or (b) be provided with a request for voting instructions by the intermediary, as the registered shareholder, then the intermediary must send to the Corporation’s transfer agent an executed proxy form completed in accordance with any voting instructions received by it from the non-registered holder and may not vote in the event that no instructions are received.

 

 

The Corporation has authorized and issued Class A Shares and Class B Shares which are equal in all respects except that holders of Class A Shares (“Class A Shareholders”), as such, are not entitled to vote at meetings of shareholders of the Corporation unless entitled to vote by law, pursuant to the Corporation’s articles or as may be required by regulatory authorities. Class A Shareholders are not entitled to vote the Class A Shares owned or controlled by them on the matters identified in the Notice of Meeting to be voted on.

 

Generally, Class A Shareholders are entitled to receive notices of all meetings of shareholders of the Corporation and to attend and speak at such meetings. In addition to notices of shareholders’ meetings, Class A Shareholders are entitled to receive all informational documentation sent to the Class B Shareholders of the Corporation.

 

Class B Shareholders are entitled to one vote for each Class B Share held at all meetings of shareholders except meetings at which only the holders of a specified class of shares other than the Class B Shares are entitled to vote.

 

In the event of either a “take-over bid” or an “issuer bid” (as those terms are defined in the Securities Act of Ontario) being made for the Class B Shares and no corresponding offer being made to purchase Class A Shares, the Class A Shareholders would have no right under the articles of the Corporation or under any applicable statute to require that a similar offer be made to them to purchase their Class A Shares.

 

 

The persons (the “Management Nominees”) named in the form of proxy provided to Class B Shareholders are directors and officers of the Corporation.

 

Class B Shareholders have the right to appoint persons, other than the Management Nominees, who need not be shareholders to represent them at the Meeting. To exercise this right, a Class B Shareholder may insert the name of the desired person in the blank space provided in the form of proxy accompanying this Circular or may submit another form of proxy.

 

Class B Shares represented by properly executed proxies will be voted by the Management Nominees on any ballot that may be called for, unless the shareholder has directed otherwise, (i) for the election of Directors (item 2 in the Notice of Meeting), (ii) for the appointment of auditors and authorizing the directors to fix the remuneration of the auditors (item 3 in the Notice of Meeting), (iii) for the approval of the Corporation’s 2006 Equity Incentive Plan (item 4 in the Notice of Meeting), (iv) for the resolution authorizing the issue of Class A Shares to the Oppenheimer & Co. Inc. 401(k) Plan (item 5 in the Notice of Meeting), and (v) for the resolution confirming the grant of stock options on 10,000 Class A Shares to an employee of Oppenheimer & Co. Inc. (item 6 in the Notice of Meeting).

 

It is not intended to use the proxies solicited from Class B Shareholders for the purpose of voting upon the consolidated financial statements of the Corporation for the year ended December 31, 2006, or the report of the auditors thereon.

 

Each form of proxy confers discretionary authority with respect to amendments or variations to matters identified in the Notice of Meeting to which the proxy relates and other matters which may properly come before the Meeting. Management knows of no matters to come before the Meeting other than the matters referred to in the Notice of Meeting. However, if matters which are not known to the management should properly come before the Meeting, the proxies will be voted on such matters in accordance with the best judgment of the person or persons voting the proxies.

 

A Class B Shareholder who has given a proxy has the power to revoke it prior to the commencement of the Meeting by depositing an instrument in writing executed by the Class B Shareholder or by the Class B Shareholder’s attorney authorized in writing either at the registered office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, or with the Chairman of the Meeting on the day of the Meeting or any adjournment thereof or in any other manner permitted by law. A Class B Shareholder who has given a proxy has the power to revoke it after the commencement of the Meeting as to any matter on which a vote has not been cast under the proxy by delivering written notice of revocation to the Chairman of the Meeting.

 

A Class B Shareholder who has given a proxy may also revoke it by signing a form of proxy bearing a later date and returning such proxy to the Secretary of the Corporation at the registered office of the Corporation prior to the commencement of the Meeting.

 

The Consolidated Financial Statement and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2006, are included in the Annual Report, which has been mailed to shareholders with the Circular. These consolidated financial statements are also available on the Corporation’s website at www.opco.com and regulatory websites at www.sedar.com or www.sec.gov (for EDGAR filings).

 

The Board of Directors of the Corporation currently consists of seven directors to be elected annually. The term of office for each director is from the date of the meeting at which the director is elected until the close of the next annual meeting of shareholders or until his or her successor is duly elected or appointed, unless his or her office is earlier vacated in accordance with the by-laws of the Corporation.

 

The Nominating/Corporate Governance Committee of the Board (the “Committee”) has recommended and the directors have determined that seven directors are to be elected at the Meeting. Management does not contemplate that any of the nominees named below will be unable to serve as a director, but, if such an event should occur for any reason prior to the Meeting, the Management Nominees reserve the right to vote for another nominee or nominees in their discretion. The following sets out information with respect to the proposed nominees for election as directors as recommended by the Committee, in accordance with the Nominating/Corporate Governance Committee Charter (available at www.opco.com). The Committee has reported that it is satisfied that each of the nominees (who have served on the Board for the period indicated below) is fully able and fully committed to serve the best interests of the Corporation’s shareholders. The election of the directors nominated requires the affirmative vote of a simple majority of the Class B Shares voted at the meeting.

 

Nominees for Election to the Board of Directors

 

 

Notes:

 

 

 

 

 

Directors’ and Officers’ Insurance

 

The Corporation carries liability insurance for its directors and officers and the directors and officers of its subsidiaries. Between November 30, 2005 and November 30, 2006, the Corporation’s aggregate insurance coverage was $20 million with a $2.5 million deductible at an aggregate annual premium of $624,000. This coverage was renewed for a further year effective November 30, 2006 at an aggregate annual premium of $569,000.

 

Under the by-laws of the Corporation, the Corporation is obligated to indemnify the directors and officers of the Corporation and its subsidiaries to the maximum extent permitted by the Canada Business Corporations Act. The Corporation has entered into indemnity agreements with each of its directors providing for such indemnities.

 

Director Compensation

 

The following table describes director compensation for the year ended December 31, 2006.

 

DIRECTOR COMPENSATION TABLE

 

 

Notes:

 

 

In the year ending December 31, 2006, the Corporation paid directors’ fees as follows:

 

 

In 2006, the directors were paid directors’ fees of $263,000 in the aggregate. Directors are reimbursed for travel and related expenses incurred in attending board and committee meetings. The directors who are not employees of the Corporation and its subsidiaries are also entitled to the automatic grant of stock options under the Corporation’s 2006 Equity Incentive Plan pursuant to a formula set out in the Plan. Reference is made to the Table under Director Stock Options, below.

 

Director Stock Options

 

Under the Corporation’s 1996 and 2006 Equity Incentive Plans, non-employee directors were and are entitled to automatic option grants of 5,000 Class A Shares for each full year of service up to a maximum of options on 25,000 Class A Shares of the Corporation in any five year period.

 

The following table describes non-employee director options held at December 31, 2006 as well as the grant date fair value of options granted in 2006:

 

 

 

Board and Committee Meetings Held

 

During 2006, the following numbers of board and committee meetings were held:

 

 

Summary of Attendance of Directors

 

 

N/A means not applicable

 

Director Attendance at Annual Meeting

 

At the last annual meeting of shareholders held on May 15, 2006, 7 of the 7 nominees for election as Director attended. It is the Corporation’s policy that its Directors attend its shareholders meetings.

 

Director Share Ownership

 

Director share ownership is included under Security Ownership of Certain Beneficial Owners and Management, below.

 

The Audit Committee has nominated PricewaterhouseCoopers LLP for reappointment as auditors of the Corporation for the 2007 fiscal year.

 

PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following information is provided in accordance with the requirements of Item 9(e) of Schedule 14A of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), “Principal Accounting Fees and Services”.

 

PricewaterhouseCoopers LLP has served as the auditors of the Corporation since 1993. PricewaterhouseCoopers LLP has advised the Corporation that neither the firm nor any of its members or associates has any direct financial interest or any material indirect financial interest in the Corporation or any of its affiliates other than as accountants.

 

The fees billed to the Corporation and its subsidiaries by PricewaterhouseCoopers LLP during the years 2006 and 2005 were as follows:

 

 

The audit fees include the fees for the audit of the Corporation’s annual consolidated financial statements for the year 2006 and the review of the quarterly financial statements included in the Forms 10-Q filed by the Corporation and the interim reports to shareholders sent to shareholders during the year. Other audit-related fees include fees for audits of the Corporation’s employee benefit plans. During 2006 and 2005, the Corporation retained Ernst & Young LLP to provide tax related services to the Corporation. PricewaterhouseCoopers LLP provides tax compliance services for the Corporation in Canada. The Corporation, with the approval of the Audit Committee, has retained Plante Moran, PLLC to perform the audit of the Oppenheimer & Co. Inc. 401(K) Plan for the year ended December 31, 2006.

 

The Audit Committee has the sole authority and responsibility to nominate independent auditors for appointment by shareholders, and to recommend to shareholders that independent auditors be removed. The Audit Committee has nominated PricewaterhouseCoopers LLP for appointment as the Corporation’s auditors by the shareholders at the Meeting.

 

The Audit Committee recommends and the Board approves all audit engagement fees and terms as well as approves all non-audit engagements and engagement fees provided by independent auditors. The process begins prior to the commencement of the audit. The fees described above were 100% pre-approved.

 

Each of the matters referred to in (a), (b) and (c) below involve the approval of the issue of Class A Shares to or for the benefit of employees of the Corporation and its subsidiaries as part of their compensation. It is a requirement of both the New York Stock Exchange (the “NYSE”) and the Toronto Stock Exchange (the “TSX”) that these matters be approved by the holders of the Class B Shares.

 

Class B Shareholders are being asked at the Meeting to consider and, if deemed advisable, pass the resolution set out below confirming the adoption of the Corporation’s 2006 Equity Incentive Plan (the “Plan”) (attached to the Circular as Schedule B) approved by the directors on December 11, 2006. The 1996 Equity Incentive Plan expired on April 19, 2006.

 

The grant of stock options under the Plan is a significant component of the Corporation’s compensation program for the executive officers and directors of the Corporation and its subsidiaries and for certain of Oppenheimer’s investment executives. The granting of stock options to key personnel is intended to align their interests with those of the Class A and Class B Shareholders. Accordingly, the number of Class A Shares underlying existing options and reserved for future option grants as a percentage of the issued Class A and Class B Shares might be perceived as being relatively high. The Board and the Compensation and Stock Option Committee recognize this and have adopted a policy of maintaining the percentage of optioned Class A Shares plus Class A Shares reserved for future options and other stock-based awards, at any one time, to not more than 20% of the number of issued Class A and Class B Shares. The Corporation purchases and will continue to purchase Class A Shares for cancellation from time to time at prices deemed appropriate, pursuant to the Corporation’s normal course issuer bid, thus offsetting, at least in part, the issue of Class A Shares under the Plan. In order to reduce the issuance of Class A Shares, the Corporation has a stock appreciation rights plan under which certain employees are granted stock appreciation rights.

 

As of the date of the Circular, there were options outstanding on 1,051,436 Class A Shares granted under the Corporation’s 1996 Equity Incentive Plan and options on 84,103 Class A Shares granted under the Corporation’s 2006

Equity Incentive Plan, which options may not be exercised unless the Class B Shareholders approve the 2006 Equity Incentive Plan.

 

All terms of the 2006 Equity Incentive Plan which is attached as Schedule B are set out therein.

 

Accordingly, Class B shareholders are being asked to consider and, if deemed advisable, pass the following resolution:

 

RESOLVED THAT:

 

 

To be effective this resolution must be passed by a simple majority of the votes cast by the Class B Shareholders.

 

Oppenheimer & Co. Inc. (“Oppenheimer”) maintains a 401(k) Plan (the “401(k) Plan”) for its employees and those of its subsidiaries in the United States, as a defined contribution retirement and profit sharing plan in accordance with the provisions of the United States Internal Revenue Code. Employees are eligible to participate on the completion of one year of employment. Oppenheimer and its eligible employees make contributions to the 401(k) Plan which is administered by a Trustee. Amounts of contributions are limited by the 401(k) Plan. Participants in the 401(k) Plan are entitled to the direct investment of the funds in the 401(k) Plan held for their accounts from a selection of investments designated by Oppenheimer including Class A Shares issued from treasury. Prior to year-end the Board conditionally issues Class A Shares to the 401(k) Plan at the closing price on the NYSE on the date of conditional issue. At the end of the year, participants select their investments and, where Class A Shares are selected, the Corporation issues Class A Shares to the 401(k) Plan at the price set as at the date of conditional issue.

 

Annual contributions to the 401(k) Plan vest depending on the years of service of the employee. Distributions under the 401(k) Plan are made on termination of employment, or retirement, or death and in certain other instances prescribed in the 401(k) Plan including financial hardship.

 

On May 9, 2005, the Class A and Class B Shareholders authorized the issue of an additional 180,000 Class A Shares to the 401(k) Plan (totalling 380,000 Class A Shares authorized since May 12, 2003). Since then, 339,323 Class A Shares have been issued to the 401(k) Plan and it is anticipated that a further 300,000 Class A Shares will be required for the 401(k) Plan for the next several years.

 

Accordingly, Class B Shareholders are being asked to consider and, if deemed advisable, pass a resolution authorizing the issue, from time to time, of up to an additional 300,000 Class A Shares to the 401(k) Plan at the closing NYSE price on the dates of conditional issue.

 

RESOLVED THAT:

 

 

To be effective this resolution must be passed by a simple majority of the votes cast by the Class B shareholders.

 

On April 27, 2006, the Board of Directors approved the grant of a stock option on 10,000 Class A Shares to an employee of Oppenheimer as an inducement for employment priced at the closing price on the NYSE for the Class A Shares on that date of $26.50 per share. The option vests as to 25% on April 27, 2008 with further 25% vested increments on April 27, 2009, April 27, 2010 and October 27, 2010 and expires on April 26, 2011. The option was granted after the expiration of the 1996 Equity Incentive Plan consistent with the terms and conditions of the 1996 Equity Incentive Plan.

 

Accordingly, Class B Shareholders are being asked to consider and, if deemed advisable, pass a resolution approving the grant of a stock option on 10,000 Class A Shares to an employee of the Oppenheimer, consistent with the terms and conditions described in the 1996 Equity Incentive Plan.

 

RESOLVED THAT:

 

 

To be effective this resolution must be passed by a simple majority of the votes cast by the Class B shareholders.

 

None

 

The Class A Shares are listed on the TSX and the NYSE. Accordingly, the Corporation is subject to the corporate governance and disclosure requirements of the Canadian securities administrators (the “CSA”), the corporate governance listing standards of the NYSE, applicable rules of the United States Securities and Exchange Commission (“SEC”), and provisions of the Sarbanes-Oxley Act of 2002 (“SOX”).

 

The Corporation’s Nominating/Corporate Governance Committee and its Board continue to monitor regulatory changes and best practices in corporate governance and consider amendments to its practices and policies as appropriate. Attached as Schedule A is the Corporation’s Statement of Corporate Governance Practices.

 

The Corporation’s Statement of Corporate Governance Practices, Code of Conduct and Committee Charters, as well as its Code of Ethics and Business Ethics for Directors, Officers and Employees and its Whistleblower Policy, are posted on the Corporation’s website at www.opco.com. These documents can also be requested by writing to the Corporation at its head office or by making an email request to investorrelations@opy.ca.

 

As required by the Corporation’s Audit Committee Charter, the Audit Committee reports as follows.

 

The Audit Committee of the Board oversees the Corporation’s financial reporting process on behalf of the Board. It meets with management and the Corporation’s internal audit group and independent auditors regularly and reports the results of its activities to the Board. In this connection, the Audit Committee has done with respect to fiscal 2006 the following:

 

Reviewed and discussed with the Corporation’s management and PricewaterhouseCoopers LLP, the Corporation’s unaudited quarterly reports on Form 10-Q and quarterly reports to shareholders for the first three quarters of the year;

 

Reviewed and discussed the Corporation’s audited financial statements and report on Form 10-K for the fiscal year ended December 31, 2006 with the Corporation’s management and PricewaterhouseCoopers LLP;

 

Reviewed and discussed with Oppenheimer’s Internal Auditors their program for the year and their testing of internal controls in accordance with section 404 of the Sarbanes-Oxley Act of 2002;

 

Discussed with PricewaterhouseCoopers LLP the matters required to be discussed by SAS 61 (American Institute of Certified Public Accountants Codification of Statements on Auditing Standards), as amended;

 

Received written disclosure regarding independence from PricewaterhouseCoopers LLP as required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committee) and discussed with PricewaterhouseCoopers LLP its independence; and

 

Discussed with management and with PricewaterhouseCoopers LLP the documentation and testing of the Corporation’s internal accounting controls in accordance with the requirements of section 404 of the Sarbanes-Oxley Act of 2002.

 

Based on the foregoing, the Audit Committee recommended to the Board that the Corporation’s audited financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations be approved and included in the Corporation’s Annual Report on Form 10-K and Annual Report to Shareholders for the year ended December 31, 2006.

 

 

 

Burton Winberg — Chairman

John L. Bitove

Kenneth W. McArthur

 

Audit Committee Financial Expert

 

The Board of Directors has determined that the Audit Committee includes one financial expert and that Mr. K.W. McArthur, the financial expert, is independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act. Mr. McArthur is a member of the Institute of Chartered Accountants of British Columbia.

 

As required by the Nominating/Corporate Governance Committee’s Charter, the Nominating/Corporate Governance Committee reports as follows:

 

The Nominating/Corporate Governance Committee is responsible for maintaining and developing governance principles consistent with high standards of corporate governance.

 

The Nominating/Corporate Governance Committee assessed the composition and size of the Board and recommended the nominees to stand for election as directors at the annual meeting of shareholders, as well as the committee members and Chairs for the year. In addition, it assessed director compensation practices of comparable companies and made recommendations to the Board.

 

The Nominating/Corporate Governance Committee determined that Messrs. Bitove, Crystal, McArthur and Winberg are independent in accordance with the Corporation’s independence standards. In addition, the Nominating/Corporate Governance Committee monitored director attendance at Board and Committee meetings and determined that all directors attended at least 85% of meetings and that such attendance meets acceptable standards.

 

The Nominating/Corporate Governance Committee supervised the Board’s annual review of the Corporation’s Corporate Governance Guidelines.

 

 

 

Kenneth W. McArthur — Chairman

John L. Bitove

Richard Crystal

Burton Winberg

 

Introduction

 

The following Compensation Discussion and Analysis is provided as required by Item 402 “Executive Compensation” of Regulation S-K under the Exchange Act. It describes the material elements of compensation for the Corporation’s named executive officers identified in the Summary Compensation Table (the “Named Executives”). The Compensation and Stock Option Committee of the Board (the “Compensation Committee”) makes all decisions for the total direct compensation (that is, the base salary, bonus awards, stock options and stock awards) of the Corporation’s executive officers, including the Named Executives. The Compensation Committee’s recommendations for the total direct compensation of the Corporation’s Chief Executive Officer (the “CEO”) are subject, in part, to the Performance-Based Compensation Agreement, Amended and Restated March 15, 2005, which was included as Schedule E in the Corporation’s Proxy Circular dated March 24, 2005 and which received shareholder approval on May 9, 2005 (the “Performance-Based Compensation Agreement”).

 

The day-to-day design and administration of health benefits, the deferred compensation plans and the 401(k) plan and other employee benefits plans and policies applicable to salaried U.S.-based employees in general are handled by Oppenheimer’s Human Resources, Finance and Legal Department employees. The Compensation Committee remains responsible for certain fundamental changes outside the day-to-day requirements necessary to maintain these plans and policies.

 

The Corporation has adopted a Compensation and Stock Option Committee Charter which is posted on the Corporation’s website — www.opco.com. The processes and procedures of the Compensation Committee are discussed below as is the role of the Compensation Committee in dealing with the Chief Executive Officer’s compensation and the compensation of other Named Executives. Under its Charter, the Compensation Compensation is required to discharge the Board’s responsibilities relating to compensation of the Corporation’s senior executive officers and to report thereon to shareholders in the Corporation’s Annual Management Proxy Circular. The Compensation Committee relies on recommendations from the Chief Executive Officer with respect to the compensation of Named Executives other than the Chief Executive Officer.

 

For the purposes of determining 2006 executive compensation, the Compensation Committee did not retain compensation consultants although it is open to the Compensation Committee to retain compensation consultants when deemed necessary.

 

Objectives and Policies

 

The Committee’s objective is to provide a competitive compensation program with appropriate incentives for superior performance, thereby providing a strong and direct link between corporate and individual performance and compensation. The Corporation’s compensation policy with respect to its named executives has the following stated objectives:

 

 

The Corporation’s compensation program for senior executive officers, including the Named Executives, consists of the following key elements: a base salary, an annual bonus, grants of stock options and, in the case of the CEO, the Performance-Based Compensation Agreement.

 

In arriving at its recommendations concerning the specific components of the Corporation’s compensation program, the Compensation Committee considers certain public information about the compensation paid by a group of

comparable public Canadian and U.S. broker-dealers and the relative performance of the Corporation as measured by net income levels and earnings per share, among other factors. The goal of the Compensation Committee is to provide the compensation structure to enable the Corporation to retain and reward the executive officers that it believes are critical to its long-term success. The Compensation Committee also structures compensation to ensure that a portion of its named executives’ compensation is directly related to its share performance and other factors that directly and indirectly influence shareholder value.

 

The Compensation Committee believes incentive compensation (annual bonus and to a lesser extent, share-based awards) should comprise between 65% to 95% of total compensation for the named executives because:

 

 

Generally, the Compensation Committee’s approach has been to approve total compensation including annual bonuses for the Corporation’s Named Executives. The Compensation Committee does not necessarily grant share-based awards on an annual basis to employees, including the Named Executives, but considers the number of outstanding share-based awards already awarded to the employee when determining total compensation in any year. Upon the expiration of an employee’s share-based awards, the Compensation Committee makes the determination whether or not to grant new awards and on what terms. All share-based awards are priced at grant date fair value. The Compensation Committee believes that, as shareholders, the Named Executives will be motivated to consistently deliver financial results that build wealth for all shareholders over the long-term. However, with the adoption of Statement of Financial Accounting Standards (“SFAS”) 123(R), Share-Based Payment, on January 1, 2006, the Corporation is required to expense stock options. During 2006, the Corporation granted only a very limited number of stock options and none to the Named Executives. The Compensation Committee is cognizant of the impact of SFAS 123(R) on the Corporation’s financial results and will strive to balance the granting of stock options and stock awards with the other objectives of executive compensation set forth above.

 

The Compensation Committee believes that this approach best serves the interests of shareholders by enabling the Corporation to structure compensation in a way that meets the requirements of the highly competitive environment in which the Corporation operates, while ensuring that senior executive officers are compensated in a manner that advances both the short and long-term interests of shareholders.

 

Compensation for the Corporation’s senior executive officers, except the CEO, involves a significant component of remuneration which is contingent on the performance of both the Corporation and the senior executive officer: the annual bonus (which permits individual performance to be recognized on an annual basis, and which is based, in significant part, on an evaluation of the contribution made by the officer to corporate performance) and stock options (which directly relate a portion of compensation to stock price appreciation realized by the Corporation’s shareholders).

 

Determination of 2006 compensation

 

The Compensation Committee, with recommendations from the CEO, determined all compensation for each Named Executive, except the CEO, for 2006. See discussion of CEO compensation below.

 

The Compensation Committee determines the Named Executives’ annual salaries, annual bonus and share-based awards by reference to the executive’s position, responsibilities and performance. Some of the factors considered by the Compensation Committee are:

 

 

The CEO assessed each Named Executive’s performance under the performance assessment program, and the Compensation Committee assessed the CEO’s performance. The Corporation’s performance assessment program rates performance in different competencies, as follows:

 

 

Base Salary.  Salaries paid to senior executive officers (other than the Chief Executive Officer) are reviewed annually by the Compensation Committee considering recommendations made by the Chief Executive Officer to the Compensation Committee, based upon the Chief Executive Officer’s assessment of the nature of the position, and the skills, experience and performance of each senior executive officer, as well as salaries paid by comparable companies in the Corporation’s industry. The Compensation Committee then makes recommendations to the Board with respect to base salaries.

 

Annual Bonus.  Bonuses paid to senior executive officers (other than the CEO) are reviewed annually by the Compensation Committee considering recommendations made by the CEO to the Compensation Committee, based upon the CEO’s assessment of the performance of the Corporation and his assessment of the contribution of each senior executive to that performance. The Compensation Committee then makes recommendations to the Board with respect to bonuses. Senior executive officers, including the CEO, of Oppenheimer have the right to elect to defer a portion of their annual bonus and performance-based compensation under Oppenheimer’s Executive Deferred Compensation Plan, a non-qualified unfunded plan.

 

Stock Option Grants.  Under the Corporation’s 1996 Equity Incentive Plan and 2006 Equity Incentive Plan (together the “EIP”), senior executive officers and employees of the Corporation and its subsidiaries were and may be granted stock options by the Compensation Committee based upon a variety of considerations, including the date of the last grant made to the officer or employee, as well as considerations relating to the contribution and performance of the specific optionee.

 

No Backdating or Spring Loading:  The Corporation does not backdate options or grant options retroactively. In addition, it does not plan to coordinate grants of options so that they are made before announcement of favorable information, or after announcement of unfavorable information. The Corporation’s options are granted at fair market value on a fixed date or event (such as the first regular meeting of the Board of Directors following an employee’s hire), with all required approvals obtained in advance of or on the actual grant date. All grants require the approval of the Compensation Committee and confirmation by the Board.

 

Fair Market Value:  Fair market value has been consistently determined, as required by the EIP, as the closing price on the New York Stock Exchange (“NYSE”) on the grant date. In order to ensure that an exercise price fairly reflects all material information — without regard to whether the information seems positive or negative — every grant of options is contingent upon an assurance by the Corporation’s General Counsel that the Corporation is not in possession of material

non-public information. If the Corporation is in possession of such information, grants or the determination of a stock option exercise price are suspended until the second business day after public dissemination of the information.

 

Stock Awards.  Under the Corporation’s Employee Share Plan (the “ESP”), executive officers and employees of the Corporation and its subsidiaries (other than the Chief Executive Officer) are granted stock awards by the Compensation Committee based upon the recommendations of the Chief Executive Officer and based upon a variety of considerations, relating to the contribution and performance of the specific awardee. A limited number of senior executives and employees, including Mr. Okin, are offered the opportunity to elect to receive up to 25% of their year-end bonus in Class A Shares. Under the terms of this offer, the employee elects with respect to his/her year-end bonus at the end of the preceding fiscal year and may elect to purchase the Class A Shares at fair market value on the date (within the first week of January) in the following fiscal year, determined by the Compensation Committee).

 

Executive Deferred Compensation Plan.  The Executive Deferred Compensation Plan (“EDCP”) was established with a dual purpose. The EDCP, together with its sister plan, the Deferred Incentive Plan (“DIP”), is maintained to offer certain high-performing financial advisors bonuses requiring a mandatory deferral subject to vesting provisions. Further description of the EDCP and the DIP can be found in note 12 to the Corporation’s consolidated financial statements for the year ended December 31, 2006. The EDCP also provides for voluntary deferral of year-end bonuses by it’s the Corporation’s senior executives. These voluntary deferrals are not subject to vesting. The Company does not make contributions to the EDCP for the Named Executives and other senior level executives. Mr. Lowenthal has made voluntary deferrals into the EDCP.

 

Benefits.  As salaried, U.S.-based employees, the Named Executives participate in a variety of benefits designed to enable the Corporation to attract and retain its workforce in a competitive marketplace. Health and welfare benefits help ensure that the Corporation has a productive and focused workforce through reliable and competitive health and other benefits. Deferred compensation and 401(k) plans help employees, especially long-service employees, save and prepare financially for retirement. The Named Executives receive the same benefits as all full time employees. Oppenheimer’s qualified 401(k) Plan allowed employees to contribute up to $15,000 for 2006 ($15,500 for 2007) plus an additional $5000 for employees over age 50. Employees may continue to retain their 401(k) Plan account after they leave Oppenheimer so long as their account balance is $5000 or more. At age 70.5, minimum distributions must begin.

 

Perquisites.  The Named Executive Officers, along with other senior management employees, are provided a limited number of perquisites whose primary purpose is the Corporation’s desire to minimize distractions from the executives’ attention to important corporate initiatives. An item is not a perquisite if it is integrally and directly related to the performance of the executive’s duties. An item that is not integrally and directly related to the performance of the executive’s duties is a perquisite if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the Corporation, unless it is generally available on a non-discriminatory basis to all employees.

 

The Corporation provides the following, all of which are quantified in the Summary Compensation Table, below and detailed in the All Other Compensation table, below.

 

Award trips — There are two annual Award Trips for Oppenheimer’s highest producing financial advisors and their spouses. The Chairman’s Council Trip rewards the 40 highest producers and the Executive Council Trip rewards the next 40 highest producers. Messrs. Lowenthal, Okin and Neuhoff host these trips, along with their spouses. The value of the perquisites with respect to spousal travel is included in the Summary Compensation Table, below.

 

Parking — Messrs. Lowenthal, Okin and Ms. Roberts have company-paid parking arrangements. This benefit is included in the Summary Compensation Table, below.

 

Relocation costs — Mr. Alfano, who joined Oppenheimer on April 3, 2006, was provided with a relocation cost allowance. This benefit is included in the Summary Compensation Table, below.

 

The Corporation does not provide the Named Executives with any other perquisites such as split-dollar life insurance, reimbursement for legal counseling for personal matters, or tax reimbursement payments. The Corporation does not provide loans to executive officers, other than margin loans in margin accounts with Oppenheimer in connection with the purchase of securities (including securities of the Company) which margin accounts are substantially on the same terms, including interest rates and collateral, as those prevailing from time to time for comparable transactions with non-affiliated persons and do not involve more than the normal risk of collectibility.

 

Separation and Change in Control Arrangements — The Named Executive Officers are not eligible for benefits and payments if employment terminates in a separation or if there is a change in control, except for Mr. Alfano as described in note 2 to the Summary Compensation Table, below.

 

The Corporation does not sponsor a pension plan for its employees.

 

Chief Executive Officer Compensation

 

Mr. A.G. Lowenthal, the Chairman of the Board and the Chief Executive Officer of the Corporation and Oppenheimer, is paid a base salary set by the Compensation Committee, plus performance-based compensation under the Performance-Based Compensation Agreement and, at the discretion of the Committee, is eligible for bonuses and grants of stock options.

 

On March 15, 2005, the Corporation and Mr. A.G. Lowenthal entered into the Performance-Based Compensation Agreement”. The purpose of the Performance-Based Compensation Agreement is to set the terms under which Mr. Lowenthal’s annual performance-based compensation is to be calculated during the term thereof.

 

In March of 2006, the Committee established performance goals under the Performance-Based Compensation Agreement entitling Mr. Lowenthal to a Performance Award under the Performance-Based Compensation Agreement for the year 2006 of an aggregate of up to $5 million (the maximum bonus available in a single year) determined by the application of a formula based on the following components: (i) the amount by which the closing price of one Class A Share at January 1, 2006, exceeded the closing price of one Class A Share as at December 31, 2003 multiplied by 200,000 shares; (ii) 5% of the amount by which the Corporation’s adjusted consolidated profit before income taxes for the year ended December 31, 2006 exceeded 10% of the amount of the Corporation’s consolidated shareholders’ equity as at December 31, 2005; and (iii) 2.5% of pre tax profit up to $10,000,000, 4% of pre tax profit in excess of $10,000,000 up to $40,000,000, and 5% of pre tax profit over $40,000,000. The application of the 2006 formula as set out above produced a bonus of $5 million for fiscal 2006. Mr. Lowenthal declined to accept his bonus in full. Mr. Lowenthal’s bonus is included in the Summary Compensation Table, below. In March of 2006, the Committee set Mr. Lowenthal’s base salary for 2006 at $500,000.

 

U.S. Internal Revenue Code Section 162(m)

 

The Corporation is a Canadian taxpayer. However, because Oppenheimer is a U.S. taxpayer, most compensation issues are affected by the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Tax Code”).

 

Section 162(m) of the U.S. Tax Code generally disallows a tax deduction to public corporations for annual compensation of over $1,000,000 paid to any of the Corporation’s chief executive officer and four other most highly paid executive officers (determined as of the end of each fiscal year) unless such compensation constitutes qualified performance-based compensation.

 

The Performance-Based Compensation Agreement was adopted and approved by the Class B Shareholders so that it would satisfy the requirements for performance-based compensation.

 

To the extent consistent with the Corporation’s general compensation objectives, the Committee considers the potential effect of Section 162(m) on compensation paid to the executive officers of the Corporation and its subsidiaries. However, the Committee reserves the right to award and recommend the awarding of non-deductible compensation in any circumstances it deems appropriate. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding the Corporation’s efforts to qualify, that the compensation paid by the Corporation to its executive officers will in fact satisfy the requirements for the exemption from the Section 162(m) deduction limit.

 

The Compensation and Stock Option Committee, comprised of independent directors, reviewed and discussed the above Compensation Discussion and Analysis with the Company’s management. Based on the review and discussions, the Compensation and Stock Options Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in these Proxy Materials.

 

     Members of the Compensation and Stock Option Committee

 

 

Burton Winberg — Chairman

John L. Bitove

For the Year Ended December 31, 2006

 

The following table sets forth the total annual compensation paid or accrued by the Corporation to or for the account of the Corporation’s chief executive officer (CEO), its chief financial officer (CFO) and the next three most highly paid executive officers of the Corporation and its subsidiaries, Oppenheimer and Oppenheimer Asset Management Inc. (“OAM”), the Corporation’s principal operating subsidiaries, other than the CEO and CFO, whose total cash compensation for the year ended December 31, 2006 exceeded $100,000.

 

 

Notes:

 

 

With respect to fiscal 2006, in lieu of taking his full year-end bonus in cash, Mr. Okin elected to purchase 5,264 Class A Shares priced at $33.24 per share. The price per share was the closing price of the Class A Shares on the NYSE for the January 5, 2007 grant date. In connection with his election to purchase Class A Shares with a portion of his year-end cash bonus, Mr. Okin was granted a restricted stock award under the ESP on January 5, 2007 for 790 restricted shares, subject to a three-year service requirement which cliff-vests on January 15, 2010. In addition, on January 3, 2006, Mr. Okin received 22,222 Class A Shares awarded on January 3, 2003 in connection with his initial employment by the Corporation. The value of these 22,222 Class A Shares on receipt was determined to be $19.71 per share or $437,996 in aggregate. In connection with the terms of his employment, Mr. Alfano was awarded 25,000 restricted shares under the ESP which is subject to a five-year service requirement and which cliff-vests on April 26, 2011. In addition, on April 27, 2006, Mr. Alfano was granted an option on 10,000 Class A Shares which vests as follows: 25% on April 27, 2008; 25% on April 27, 2009; 25% on April 27, 2010; 25% on October 27, 2010 and expires on April 26, 2011. Mr. Alfano’s stock option and restricted shares immediately vest upon a change of control of more than 50% of the Class B voting shares of the Corporation or the sale of Oppenheimer. In addition, subject to his continued employment with Oppenheimer, Mr. Alfano is entitled to receive deferred bonuses of $37,500 on December 31, 2007 and December 31, 2008 which would be accelerated upon a change of control of more than 50% of the Class B voting shares of the Corporation or the sale of Oppenheimer. The intrinsic value of Mr. Alfano’s option and restricted share awards and the acceleration of his deferred bonuses assuming a change of control or the sale of Oppenheimer on December 31, 2006 is $979,000.

 

 

 

For the Year Ended December 31, 2006

 

 

Notes:

 

 

For the Year Ended December 31, 2006

 

 

Notes:

 

 

As At December 31, 2006

 

 

Notes:

 

The market value is based on the closing price of the Class A Shares on the NYSE on 12/29/06 of $33.40. On April 27, 2006, Mr. Alfano was granted a restricted share award under the ESP in the amount of 25,000 Class A Shares that cliff-vests on April 26, 2011. On January 5, 2007, Mr. Okin was granted a restricted share award under the ESP in the amount of 470 Class A Shares with respect to his bonus election for fiscal 2006. Mr. Okin’s award cliff-vests on January 15, 2010. See note 2 to the Summary Compensation Table, above.

 

For the Year Ended December 31, 2006

 

 

None of the Named Executives exercised stock options or stock awards during 2006. Messrs. Okin and Alfano are the only Named Executives with restricted stock awards. See note 2 to the Summary Compensation Table, above.

 

Nonqualified Deferred Compensation Table
For the Year End December 31, 2006

 

 

Notes:

 

 

The following graph shows changes over the past five year period of U.S. $100 invested in (1) the Company’s Class A Shares, (2) the Standard & Poors 500 Index, and (3) the Standard & Poors / Toronto Stock Exchange Composite Index.

 

 

 

The authorized capital of the Corporation includes 99,680 Class B Shares all of which are issued and outstanding and may be voted at the Meeting and an unlimited number of Class A Shares of which 13,078,699 Class A Shares were outstanding as at March 14, 2007.

 

The following table sets forth certain information regarding the beneficial ownership of each class of shares of the Corporation as at March 14, 2007, with respect to (i) each person known by the Corporation to beneficially own, or exercise control or discretion over, more than 5% of any class of the Corporation’s shares, (ii) each of the Corporation’s

directors, (iii) each of the Corporation’s executive officers named in the Summary Compensation Table set forth herein and (iv) the directors and executive officers as a group.

 

For purposes of the table, beneficial ownership is determined pursuant to Rule 13d-3 of the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of shares which such person or group has the right to acquire within 60 days after March 14, 2007. The percentage of shares deemed outstanding is based on 13,078,699 Class A Shares and 99,680 Class B Shares outstanding as of March 14, 2007. In addition, for purposes of computing the percentage of Class A Shares owned by each person, the percentage includes all Class A Shares issuable upon the exercise of outstanding options held by such persons within 60 days after March 14, 2007.

 

There are no outstanding rights to acquire beneficial ownership of any Class B Shares.

 

Mr. A.G. Lowenthal and Mrs. Olga Roberts have advised the Corporation that they intend to vote all of the Class B Shares owned and controlled by them for the matters referred to in the Notice of Meeting to be voted on at the Meeting.

 

 

* Less than 1%

 

 

 

 

 

Compliance with Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the Corporation’s directors and executive officers, and persons who own more than ten percent of a registered class of the Corporation’s equity securities, to file by specific dates with the Securities Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of equity securities of the Corporation. Officers, directors and greater than ten percent Shareholders are required by SEC regulation to furnish the Corporation with copies of all Section 16(a) forms that they file. The Corporation is required to report in this Circular any failure of its directors and executive officers and greater than ten percent Shareholders to file by the relevant due date any of these reports during the preceding fiscal year (or, to the extent not previously disclosed, any prior fiscal year).

 

To the Corporation’s knowledge, based solely on review of copies of such reports furnished to the Corporation during the fiscal year ended December 31, 2006 and representations made to the Corporation by such persons, all Section 16(a) filing requirements applicable to the Corporation’s officers, directors and greater than ten percent Shareholders were complied with.

 

Indebtedness of Directors and Executive Officers

 

The following sets out information with respect to the aggregate indebtedness of directors and executive officers under securities purchase and other programs. At December 31, 2006 and since that date none of the directors and the executive officers of the Corporation were or have been indebted to the Corporation.

 

Indebtedness Of Directors And Executive Officers Under (1) Securities Purchase And (2) Other Programs