SCHEDULE 14A

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

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LENNAR CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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700 Northwest 107th Avenue
Miami, Florida 33172
(305) 559-4000

 

Notice of 2010 Annual Meeting of Stockholders

 

 

To the Stockholders of Lennar Corporation:

 

This is to notify you that the 2010 Annual Meeting of Stockholders of Lennar Corporation will be held at our offices at 700 Northwest 107th Avenue, Second Floor, Miami, Florida 33172 on Wednesday, April 14, 2010, at 11:00 a.m. Eastern Time, for the following purposes:

 

 

Only stockholders of record at the close of business on February 16, 2010 will be entitled to notice of and to vote at the meeting or any adjournment of the meeting.

 

We cordially invite you to attend the annual meeting in person. However, whether or not you plan to attend the meeting in person, it is important that your shares are represented at the meeting. We ask that you either vote your shares or return the enclosed proxy card at your earliest convenience. You may revoke your proxy at any time before its use.

 

By Order of the Board of Directors

 

Mark Sustana
Secretary and General Counsel

 

Miami, Florida

March 4, 2010

 

700 Northwest 107th Avenue

Miami, Florida 33172

(305) 559-4000

 

2010 Annual Meeting of Stockholders

 

Proxy Statement

 

Solicitation of Proxies

 

Our Board of Directors is soliciting the accompanying proxy in connection with matters to be considered at our 2010 Annual Meeting of Stockholders to be held at our offices at 700 Northwest 107th Avenue, Second Floor, Miami, Florida 33172 on Wednesday, April 14, 2010 at 11:00 a.m. Eastern Time. The individuals named on the proxy card will vote all shares represented by proxies in the manner designated or, if no designation is made, they will vote as follows:

 

 

The individuals acting as proxies will not vote shares that are the subject of a proxy card on a particular matter if the proxy card instructs them to abstain from voting on that matter or to the extent the proxy card is marked to show that some of the shares represented by the proxy card are not to be voted on that matter.

 

Record Date

 

Only stockholders of record at the close of business on February 16, 2010 will be entitled to notice of or to vote at this annual meeting or any adjournment of the meeting. On or about March 4, 2010, we are mailing a Notice of Availability of Proxy Materials, which describes how to obtain copies of this proxy statement, to all stockholders of record on February 16, 2010.

 

Shares Outstanding and Voting Rights

 

At February 16, 2010, we had two classes of voting stock outstanding, Class A common stock and Class B common stock. At February 16, 2010, 153,627,019 shares of Class A common stock were outstanding and 31,288,168 shares of Class B common stock were outstanding. Each outstanding share of Class A common stock entitles the holder to one vote. Each outstanding share of Class B common stock entitles the holder to ten votes.

Counting Votes

 

The inspector of election appointed for the meeting will count the votes cast by proxy or in person at the annual meeting. A majority in voting power, and not less than one-third in number, of the shares entitled to vote, represented in person or by proxy, will constitute a quorum for the transaction of business at the annual meeting. Our 401(k) plan provides that the trustee of the 401(k) plan will vote the shares of our common stock that are not directly voted by the participants. Shares as to which there are abstentions, and shares held by brokers that are not voted as to particular proposals, will nonetheless be included in determining if a quorum is present or represented at the annual meeting. Because of a recent change in New York Stock Exchange rules, brokers who hold shares in street name for customers will not be able to vote the shares with respect to the election of directors or with regard to the stockholder proposal without instructions from their customers. Shares for which brokers have not received instructions, and which therefore are not voted, with respect to a particular proposal are referred to as “broker non-votes” with respect to that proposal. Neither abstentions from voting on a proposal described in this proxy statement nor broker non-votes will affect the outcome of the vote on that proposal.

 

Voting Requirements

 

Each Director will be elected by a plurality of the votes cast with regard to the election of Directors by the holders of shares of our Class A and Class B common stock, voting together as a single class. A majority of the votes cast by the holders of shares of our Class A and Class B common stock, voting together as a single class, is required to approve the ratification of Deloitte & Touche LLP, and to approve the stockholder proposal regarding the Company’s building practices.

 

How to Vote

 

To vote by mail:

 

To vote over the Internet:

 

To vote by telephone:

 

To vote in person if you are a registered stockholder:

 

To vote in person if you hold your shares in “street name” (through a bank or broker):

Revoking Your Proxy

 

You may revoke your proxy at any time before its use:

 

(1) In person at the annual meeting;

(2) By a writing delivered to our offices before the proxy is used; or

(3) By a later-dated proxy delivered to our offices before the proxy is used.

 

Your presence at the meeting will not revoke your proxy, but if you attend the meeting and cast a ballot with regard to a matter, you will revoke your proxy as to that matter.

 

Cost and Method of Solicitation

 

We will bear the cost of soliciting proxies. We are soliciting proxies by mail and, in addition, our Directors, officers and employees (“associates”) may solicit proxies personally or by telephone. We will not reimburse any Director, officer or associate for their solicitation. We will reimburse custodians, brokerage houses, nominees and other fiduciaries for the cost of sending proxy materials to beneficial owners.

 

Principal Stockholders

 

The following table shows stock ownership information as of February 16, 2010 with respect to each of our stockholders who is known by us to be a beneficial owner of more than 5% of either class of our outstanding common stock. To our knowledge, and except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

 

 

 

 

Stock Ownership of Our Management

 

The following table shows beneficial ownership information as of February 16, 2010 for (1) each of our current Directors, (2) each of the “named executive officers” who are listed in the “Summary Compensation Table” and (3) all of our current Directors and executive officers as a group. The share amounts and ownership percentages shown for each individual in the table include shares of Class A or Class B common stock that are not currently outstanding but which the individual may acquire upon exercise of options held by

that individual that are currently exercisable or will become exercisable within 60 days after February 16, 2010. To the best of our knowledge, and except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

 

 

 

 

Because each outstanding share of Class B common stock entitles the holder to ten votes and each outstanding share of Class A common stock entitles the holder to one vote, as of February 16, 2010, Mr. Miller had the power to cast 215,816,980 votes, which is 46.3% of the combined votes that can be cast by all the holders of Class A common stock and Class B common stock, and all of our Directors and executive officers as a group had the power to cast 220,215,841 votes, which is 47.2% of the combined votes that can be cast by all the holders of Class A common stock and Class B common stock.

 

Board of Directors

 

Our Board of Directors is responsible for overseeing the management of our business. We keep Directors informed of our business at meetings and through reports and analyses presented to the Board of Directors and committees of the Board. Regular communications between the Directors and management also occur apart

from meetings of the Board of Directors and committees of the Board. Specifically, from time to time the Board schedules calls with senior management to discuss the Company’s business strategies.

 

Our Board of Directors currently consists of eight members, each of whom has a term that ends at the time of the next Annual Meeting of Stockholders. Each of the nominees is currently a director and has been nominated for re-election to the Board.

 

The following table provides information about the nominees for election as Director.

 

 

 

 

At our 2010 annual meeting, the persons named in the accompanying proxy will vote FOR the election of each of the persons listed above to serve as a member of our Board of Directors until our next Annual Meeting of Stockholders, except to the extent that particular proxies contain instructions to do otherwise.

 

Biographical Information about Our Director Nominees

 

Irving Bolotin has served as a Director of our company since 1974. Mr. Bolotin is currently retired. From 1972 until his retirement in December 1998, Mr. Bolotin served as a Senior Vice President of our company. During the past five years, Mr. Bolotin has served, and he currently serves, on the Boards of Directors of Rechtien International Trucks, Inc. and WPBT Channel 2.

 

Steven L. Gerard has served as a Director of our company since May 2000. Since October 2000, Mr. Gerard has served as a director and Chief Executive Officer of CBIZ, Inc., a provider of professional business services to individuals and companies throughout the United States. Mr. Gerard was elected Chairman of CBIZ, Inc. in October 2002. Before that, from July 1997 to October 2000, Mr. Gerard served as Chairman and Chief Executive Officer of Great Point Capital, Inc., an operations and financial consulting firm. Before that, from September 1992 to July 1997, Mr. Gerard served as Chairman and Chief Executive Officer of Triangle Wire & Cable, Inc., and its successor, Ocean View Capital, Inc., a manufacturer of residential, commercial and industrial wire and cable products. During the past five years, in addition to serving on the Board of CBIZ, Inc., Mr. Gerard has served on the Boards of Directors of The Fairchild Corporation, Timco Aviation Services, Inc and Joy Global, Inc. He currently is a director and a member of the Human Resources and Nominating Committee and the Audit Committee of Joy Global, Inc.

 

Sherrill W. Hudson became a Director in January 2008. Mr. Hudson is Chairman and Chief Executive Officer of TECO Energy, Inc. Prior to joining TECO Energy in July 2004, Mr. Hudson spent 37 years with Deloitte & Touche LLP until he retired in 2002. Mr. Hudson is a member of the Florida Institute of Certified Public Accountants. In addition to serving as Chairman of the Board of TECO Energy, Mr. Hudson has served on the board of directors of The Standard Register Company during the past five years and he currently serves on the board of directors of Publix Supermarkets, Inc.

 

R. Kirk Landon has served as a Director of our company since January 1999. Since 1996, Mr. Landon has served as the President of The Kirk Foundation and President of The Kirk A. and Dorothy P. Landon Foundation. From 2001 to 2007, Mr. Landon served as Chairman of Orange Clothing Company, a clothing

manufacturing company. From 1993 until 2006, Mr. Landon served as Chairman of Innovative Surveillance Technology, a provider of surveillance equipment. From 1983 until 2004, Mr. Landon served on the Board of Trustees of Barry University. Mr. Landon currently serves on the Board of Trustees of Florida International University.

 

Sidney Lapidus has served as a Director of our company since April 1997. Mr. Lapidus is a retired partner of Warburg Pincus LLC, a private equity investment firm, and was with Warburg Pincus from 1967 until the end of 2007. During the past five years, Mr. Lapidus has served, and he currently serves, on the board of directors of Knoll, Inc. and The Neiman Marcus Group, Inc., as well as a number of non-profit organizations.

 

Stuart A. Miller has served as a Director of our company since April 1990 and has served as our President and Chief Executive Officer since April 1997. From 1997 until 2005, Mr. Miller served as the Chairman of the Board of LNR Property Corporation, a company that invests in commercial real estate and real estate-related securities, which was a wholly-owned subsidiary of ours until it was spun-off in October 1997.

 

Donna E. Shalala has served as a Director of our company since April 2001. Since June 2001, Ms. Shalala has served as the President of the University of Miami, a private higher-education institution, as well as a Professor of Political Science. Before that, from January 1993 until January 2001, Ms. Shalala served as the U.S. Secretary of Health and Human Services. Before that, from 1987 until 1993, Ms. Shalala served as a Professor of Political Science and Chancellor of the University of Wisconsin-Madison. Ms. Shalala also served as a Professor of Political Science and President of Hunter College from 1980 to 1987 and as Assistant Secretary of the Department of Housing and Urban Development during the Carter administration. A distinguished political scientist, she has served widely in the areas of education, urban housing and health policy. During the past five years, Ms. Shalala has served, and she currently is serving, on the board of directors of Gannett Co., Inc., and she currently is a Trustee of The Henry J. Kaiser Family Foundation and a member of the Council on Foreign Relations. During the past five years, Ms. Shalala had served on the board of directors of UnitedHealth Group.

 

Jeffrey Sonnenfeld has served as a Director of our company since September 2005. Mr. Sonnenfeld has served as the Senior Associate Dean for Executive Programs and the Lester Crown Professor-in-the-Practice of Management for the Yale School of Management since 2001. In 1989, Mr. Sonnenfeld founded the Chief Executive Leadership Institute of Yale University, and he has served as its President since that time. During the past five years, Mr. Sonnenfeld had served on the board of directors of Levity HR, Inc. and TheStreet.com.

 

Corporate Governance

 

     Structure of our Board

 

Until 2006, we had both a Chairman of the Board and a Chief Executive Officer. When the then Chairman of the Board died in 2006, we did not replace him. Instead, we have a Lead Director, who presides over Board meetings and presides at all meetings of our independent Directors. Our Board thinks that arrangement works well for us, because all but one of our directors (our Chief Executive Officer) is independent, and our Lead Director can cause them to meet at any time. Therefore, the Lead Director can at any time bring to the attention of a majority of the Directors any matters he thinks should be addressed by the Board and the independent directors can, if they wish, cause the entire Board to meet in order to address matters. On the other hand, the Lead Director does not have any functions that might impair, or appear to impair, his independence.

 

     Meeting Attendance

 

Our Board of Directors normally meets quarterly, but holds additional meetings as required. Under our Corporate Governance Guidelines, each Director is required to attend substantially all meetings of the Board. During fiscal 2009, the Board of Directors met eleven times. Each Director attended at least 75% of (1) the

total number of meetings of the Board of Directors held while that Director was serving on our Board, and (2) the total number of meetings of each committee of the Board on which he or she was serving. It is our policy to encourage directors and nominees for director to attend the annual meeting of stockholders. All members of our Board attended last year’s annual meeting of stockholders, except for Mr. Landon.

 

     Independent Directors

 

Our Board of Directors has unanimously determined that seven of our eight Directors, Messrs. Bolotin, Gerard, Hudson, Landon, Lapidus and Sonnenfeld and Ms. Shalala, are “independent” Directors under the Director Qualification Standards set forth in our Corporate Governance Guidelines, which are consistent with the New York Stock Exchange Corporate Governance Standards. After considering any relevant transactions or relationships between each Director, or any of his or her family members, and the Company, our senior management and our independent registered public accounting firm, the Board of Directors has affirmatively determined that none of the independent Directors has a material relationship with us (either directly, or as a partner, stockholder, officer or affiliate of an organization that has a relationship with us), other than as a member of our Board of Directors.

 

Mr. Lapidus serves as our Lead Director. In this capacity, Mr. Lapidus presides over Board meetings in the absence of a Chairman (we have not had a Chairman since our former Chairman’s death in 2006) and presides at all meetings of our independent Directors. In connection with our regularly scheduled board meetings, our independent Directors regularly meet in executive sessions that exclude our non-independent Director and management. Mr. Lapidus presides over these executive sessions.

 

     Committees of the Board of Directors

 

Our Board of Directors has established an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, an Executive Committee and an Independent Directors Committee. We provide information about each of these committees below.

 

     Audit Committee

 

The Audit Committee consists of Messrs. Hudson (Chairperson), Bolotin, Gerard and Landon. Our Board of Directors has determined that all the members of the Audit Committee are independent, and have all other required qualifications for service on our Audit Committee, under the New York Stock Exchange Corporate Governance Standards and the applicable rules of the Securities and Exchange Commission. Our Board of Directors has also determined that Mr. Gerard and Mr. Hudson are audit committee financial experts, as that term is defined in Regulation S-K under the Securities Exchange Act. The Audit Committee met ten times during fiscal 2009.

 

Our Board of Directors has adopted a charter for the Audit Committee. A copy of the Audit Committee Charter is Appendix 1 to this proxy statement. It is also available on our website at www.lennar.com and is available in print to any stockholder who requests a copy from us. Under its charter, the principal functions of the Audit Committee are:

 

The Audit Committee’s responsibilities also include direct supervision of our internal auditors; selecting and determining the compensation of our independent registered public accounting firm; pre-approving all audit and non-audit services provided to us by our independent registered public accounting firm; meeting regularly with our independent registered public accounting firm, our management and our internal auditors; reviewing any issues regarding accounting or internal control over financial reporting, including any significant deficiencies or material weaknesses in our internal control over financial reporting reported to the Audit Committee by our Chief Executive Officer or our Chief Financial Officer; receiving and reviewing complaints regarding accounting, internal control over financial reporting or auditing matters, including anonymous submissions by associates and others regarding questionable accounting or auditing matters; and reviewing with our counsel legal compliance and legal matters that could have a significant impact on our financial statements.

 

     Compensation Committee

 

The Compensation Committee consists of Messrs. Gerard (Chairperson), Bolotin, Hudson and Landon. Our Board of Directors has determined that all the members of the Compensation Committee are independent under the New York Stock Exchange Corporate Governance Standards. The Compensation Committee met five times during fiscal 2009.

 

Our Board of Directors has adopted a charter for the Compensation Committee. A copy of the Compensation Committee Charter is available on our website at www.lennar.com and is available in print to any stockholder who requests a copy from us. The Compensation Committee’s principal functions are:

 

 

In addition, the Compensation Committee makes recommendations to the Board of Directors regarding incentive-compensation plans and equity-based plans that will apply to our senior management. The Compensation Committee has the authority to engage compensation consultants. In fiscal 2007, we engaged Hewitt Associates on the Compensation Committee’s behalf to provide an analysis of our bonus and long-term incentive programs, our compensation strategy, market comparisons, director compensation trends and potential compensation plan designs and modifications. Although the Compensation Committee did not seek any overall analyses of our compensation programs during fiscal 2008, the Compensation Committee Chairperson did consult Hewitt Associates about stock option grants that were made in July 2008.

 

Under the Lennar Corporation 2007 Equity Incentive Plan, the Compensation Committee has the authority to delegate all or a part of its duties with respect to awards under that Plan to management (excluding awards intended to qualify for an exemption under Section 162(m) of the Internal Revenue Code, awards made to individuals covered by Section 16 of the Securities Exchange Act, and awards issued to any person delegated authority by the Compensation Committee). Under the Lennar Corporation 2007 Incentive Compensation Plan, the Compensation Committee has the authority to delegate all or a part of its duties with respect to bonuses under the plan to management (excluding bonuses intended to qualify for an exemption under Section 162(m) of the Internal Revenue Code).

 

A further description of the Compensation Committee’s processes and procedures for considering and determining executive compensation is contained in the “Compensation Discussion and Analysis” section of this Proxy Statement.

     Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee consists of Ms. Shalala (Chairperson), Mr. Bolotin and Mr. Sonnenfeld. Our Board of Directors has determined that all the members of the Nominating and Corporate Governance Committee are independent under the New York Stock Exchange Corporate Governance Standards. The Nominating and Corporate Governance Committee met four times during fiscal 2009.

 

Our Board of Directors has adopted a charter for the Nominating and Corporate Governance Committee. A copy of the Nominating and Corporate Governance Committee Charter is available on our website at www.lennar.com and is available in print to any stockholder who requests a copy from us. Under its charter, the principal functions of the Nominating and Corporate Governance Committee are:

 

 

The Nominating and Corporate Governance Committee identifies and evaluates director nominees from many sources, including nominees recommended by stockholders in accordance with the procedures described below. The Nominating and Corporate Governance Committee reviews the personal characteristics and professional competencies of director candidates with the Board members to ensure that the nominees selected are those best suited, from a corporate governance standpoint, to join our Board and oversee our strategies and operations.

 

The Nominating and Corporate Governance Committee and the Board of Directors have determined that a Director should have the following characteristics, as set forth in our Corporate Governance Guidelines:

 

 

The Nominating and Corporate Governance Committee has not considered racial or ethnic diversity in evaluating possible directors. It does not believe race or ethnic background is relevant to a person’s qualifications to serve on the Board. While it recognizes the benefits of diversity of training and experience, it does not believe that race or ethnic background significantly affect a person’s ability to contribute to our Board.

The Nominating and Corporate Governance Committee will consider candidates recommended by stockholders. If a stockholder wishes to recommend a nominee for director, the stockholder should mail a recommendation to the Company containing the following information:

 

 

In making its determination whether to recommend that the Board of Directors nominate a candidate who has been recommended by a stockholder, the Nominating and Corporate Governance Committee will consider, among other things, the appropriateness of adding another Director to the Board and the candidate’s background and qualifications. The Nominating and Corporate Governance Committee may conduct an independent investigation of the background and qualifications of a candidate recommended by a stockholder, and may request an interview with the candidate. The Nominating and Corporate Governance Committee will not determine whether to recommend that the Board nominate a candidate until the Nominating and Corporate Governance Committee completes what it believes to be a reasonable investigation, even if that causes its recommendation to be delayed until after it is too late for the candidate to be nominated for election at a particular meeting of stockholders. When the Nominating and Corporate Governance Committee determines not to recommend that the Board nominate a candidate recommended by a stockholder, or the Board determines to nominate or not to nominate a candidate, the Nominating and Corporate Governance Committee will notify the recommending stockholder and the candidate of the determination.

 

     Executive Committee

 

Our By-Laws provide that the Board of Directors may establish an Executive Committee, which has all authority to act on behalf of the Board of Directors, except as that power is limited by the corporate laws of the State of Delaware, where our company is incorporated, and except as our Board of Directors otherwise provides. Our Executive Committee consists of Messrs. Miller and Lapidus. The Executive Committee took action by unanimous written consent three times during fiscal 2009.

 

     Independent Directors Committee

 

Our By-Laws require that an Independent Directors Committee review and approve certain ventures and transactions that we enter into with LNR Property Corporation (“LNR”) and significant transactions between LNR and us or any of our subsidiaries. Also, at the request of the full Board of Directors, the Chief Executive Officer or the Chief Financial Officer, the Independent Directors Committee may review or investigate any transaction or matter involving the Company or any subsidiary of the Company, whether or not the transaction or matter involves LNR. The Independent Directors Committee consists of all of the Directors who are not associates of our company. Mr. Lapidus, our Lead Director, serves as Chairperson of the Independent Directors Committee. The Independent Directors Committee met four times during fiscal 2009.

     Code of Business Conduct and Ethics

 

Our Code of Business Conduct and Ethics for our Directors, officers and associates is available on our website at www.lennar.com and is available in print to any stockholder who requests a copy from us.

 

     Corporate Governance Guidelines

 

Our Corporate Governance Guidelines are available on our website at www.lennar.com and are available in print to any stockholder who requests a copy from us.

 

If you would like to request copies of any of our committee charters, our Code of Business Conduct and Ethics, or our Corporate Governance Guidelines, please send your request to the Office of the General Counsel at Lennar Corporation, 700 Northwest 107th Avenue, Miami, Florida 33172.

 

     Matters Related to Risk Management

 

     Board Oversight of Our Exposure to Risk

 

Since 2007, our Board has followed the practice of identifying areas of risk that particularly affect our Company and assigning senior members of our management to report to the Board on each of those areas of risk on a rotating basis, so that in the course of a year, there is a report on each of them at one of the regularly scheduled quarterly Board meetings. The areas of risk identified by the Board change from time to time based on business conditions, advice of outside advisors, and review of risks identified by our competitors in their public filings. Currently, the risk areas reported on to our Board relate to liquidity, human resources, taxation, legal matters, land supply, joint ventures, homebuilding overhead, construction costs, construction quality and warranties, housing inventory management, mergers and acquisitions and natural disasters.

 

In addition, one of the responsibilities of the Audit Committee of our Board is to discuss and review policies with respect to risk assessment and risk management, including guidelines and policies governing our risk assessment and risk management processes.

 

     Effects of our Compensation Programs on Risk

 

All significant land acquisitions, debt incurrences and joint venture relationships are reviewed, and must be approved, by our senior corporate management. Therefore, even though associates in our divisions may have performance targets that will be affected by growth or short term profitability of their divisions, they are not in a position to cause us to undertake transactions that might expose us to risks that are material to us as a company without the concurrence of our senior corporate management.

 

There were no cash bonuses paid in fiscal 2008 and 2009 to our senior executives and other members of our senior corporate management, but under normal circumstances they do receive bonuses based upon achievement of performance targets that may benefit from our growth or generating short term profits. However, because most of the decisions that could expose us to significant risks relate to matters that affect us in the long term, but not in the short term, and because most of our senior executives have performance targets based on our results as a company, we do not think that, even when our incentive bonus programs are in effect, those programs create material incentives for our senior executives, or any other of our associates, to expose us to significant risk.

 

Even with regard to our Financial Services segment, although the compensation of associates may be affected by the number of mortgages we originate, because we sell almost all the mortgages we originate within 60 days after we fund them, we do not believe our compensation system creates incentives for our associates to do things that expose us to significant risks.

We have had to take significant write downs in the last three fiscal years, but they related to decisions we had made on the basis of what were believed to be in the best interests of us, as a company, and our stockholders as a whole, not on the basis of compensation incentives to particular executives or other associates. Stock options and restricted stock have long-term vesting periods, which we believe aligns the performance of our executives with the long-term goals of the Company.

 

Director Compensation

 

Non-employee Directors are paid annual fees of $50,000 per year, payable on a quarterly basis, 50% in cash and 50% in shares of our common stock. The shares are not transferable (other than to the Director’s estate) until three years after the last day of the quarter in which they are issued. In addition to the annual fees, each non-employee Director receives $3,000 for each board meeting and $1,000 for each committee meeting, other than Audit Committee meetings, attended in person (but only one fee for all Board or committee meetings attended on a single day), and $500 for each Board meeting and $250 for each committee meeting attended by teleconference. Audit Committee members receive an additional $3,000 and the Audit Committee Chairperson receives an additional $5,000 for each Audit Committee meeting attended. Audit Committee fees are paid in addition to fees for other meetings attended on the same day. A Director may elect to defer payment of both the cash and stock portion of fees until he or she no longer serves as a Director of our company. If a director makes this election, a number of phantom shares of Class A common stock with a value equal to the amount of the deferred fees (based upon the mean of the high and low sale prices of the Class A common stock on the date of the relevant meeting for meetings held prior to April 15, 2009 and based on the closing sales price of the Class A common stock on the date of the relevant meeting for meetings held beginning April 15, 2009) is credited to the director’s deferred compensation account. Amounts equal to the dividends that would have been paid if the phantom shares had actually been outstanding are also credited to the directors’ accounts and treated as though they were used to purchase additional shares of Class A common stock. Upon termination of a director’s deferred compensation account, the director will receive cash equal to the value at the time of termination of the number of phantom shares of Class A common stock credited to the director’s account.

 

Our Lead Director receives an additional $15,000 per year for his services in that capacity.

 

In addition to the fees described above, each year, on the date of our annual meeting of stockholders, each non-employee Director receives options to purchase 2,500 shares of our Class A common stock at an exercise price equal to the fair market value of our Class A common stock on that date. These options become exercisable in full six months after the grant date and expire on the third anniversary of the grant date. Directors also receive an annual grant of 2,000 shares of our Class A common stock on the date of the first Board meeting following our annual meeting of stockholders. Directors are permitted to sell 50% of that stock at any time but are required to hold the remaining 50% of the stock until the second anniversary of the date of grant.

 

Our Chief Executive Officer, who is our only employee-director, receives no additional remuneration for his service as a Director.

The following table sets forth compensation information for our last fiscal year for all of our Directors except our Chief Executive Officer. The compensation of our Chief Executive Officer is described in the section of this Proxy Statement captioned “Executive Compensation.”

 

 

 

 

Executive Compensation

 

Compensation Discussion and Analysis

 

     Overview

 

Our compensation program for executive officers is intended to attract, motivate and retain highly qualified and experienced executives, reward superior performance and provide incentives that are based on our performance as a company. Historically, our executive compensation program has consisted of the following components:

 

 

Our compensation policy has been to offer market driven base salaries commensurate with each associate’s position in the Company and individual performance, and to have a substantial portion of the total compensation paid to our senior officers be highly variable based upon individual and Company performance and be coupled with an equity component to align the interests of senior officers with those of our stockholders. Normally, we have set specific operating goals for our senior officers which normally have determined their bonus opportunities and determined the split between cash and equity based upon our performance as a Company, individual performance and industry and market conditions.

 

During fiscal 2008 and 2009, we were in the midst of a major dislocation in the market for new homes that significantly reduced the number of homes we could sell and the prices at which we could sell them. Primarily because of this, our revenues were down significantly and we had substantial operating losses. Also, the price of our stock fell from $52.50 per share at November 30, 2006, to $7.11 per share on November 30, 2008 and $12.67 on November 30, 2009. In response to the contraction in our activities, we reduced our headcount from 13,000 associates at November 30, 2006, to 3,835 associates at December 31, 2009.

 

Under those circumstances, the Compensation Committee of our Board of Directors felt it would not be appropriate to pay cash bonuses to our senior executives for fiscal 2008 or 2009. On the other hand, it recognized that it had to provide some form of incentive to our senior executives, particularly because, due to the decline in the price of our stock, the stock options they had previously received had little or no current or potential value, and the restricted stock they had been awarded was worth only a fraction of what it was worth when it was awarded. In view of this:

 

 

We do not have employment contracts, change-in-control agreements or any other severance programs for our executives. However, most of our equity incentive programs provide for acceleration of vesting if there is a change in control of the Company.

 

     Executive Compensation Objectives

 

Under normal conditions, our primary compensation objectives are to:

 

 

In order to attract, motivate and retain experienced and talented executives, we believe we must provide salaries and total compensation packages that are attractive and competitive in the homebuilding industry. We also believe it is important to have a portion of an executive’s overall compensation tied to his or her day-to-day value to the Company. When reviewing an executive’s value to the Company, we review factors such as industry experience, the number of years with the Company, significance of job function, ability to analyze and make decisions on significant business and financial objectives, and the ability to work as an important member of senior management and serve as a leader for other associates. Under current market conditions, we are not seeking to attract executives at operational levels. However, the current market conditions make it

particularly important that we retain the senior executive officers who are responsible for directing our responses to the depressed housing markets.

 

     Process for Determining Compensation

 

     Authority and Role of Compensation Committee

 

Our Compensation Committee evaluates and approves the compensation for our Chief Executive Officer and our most senior executive officers, among others, including all the named executive officers. Its determinations regarding the compensation of our Chief Executive Officer are made on the basis of the factors it believes to be applicable (discussed below). Its determinations regarding the compensation of our other corporate level executive officers take into account recommendations by our Chief Executive Officer and any other factors the Compensation Committee believes to be applicable.

 

The Compensation Committee also administers our equity programs, including awards under the Company’s 2007 Equity Incentive Plan.

 

     Role of Chief Executive Officer

 

Our Chief Executive Officer reviews the performance of our executive officers, other than himself, and makes compensation recommendations to the Compensation Committee regarding these executive officers.

 

     Compensation Consultants

 

The Compensation Committee has the authority to engage compensation consultants. In fiscal 2007, we engaged Hewitt Associates, a firm of compensation consultants, to provide the Compensation Committee with an analysis of our bonus and long-term incentive programs, our compensation strategy, market comparisons, director compensation trends and potential compensation plan designs and modifications. Hewitt Associates did not perform any other services for us during fiscal 2007.

 

In addition, in 2007, we engaged Watson Wyatt & Company, a firm of compensation consultants, to provide management with advice and information regarding bonus plans, market comparisons for various associates and potential employee retention programs.

 

We did not engage any compensation consultants to make broad recommendations during 2008 or 2009. However, in July 2008, the Chairperson of the Compensation Committee discussed with Hewitt Associates the option grants that were proposed by our management and was told that Hewitt Associates agreed with the timing and size of the proposed grants (without a discussion of the specific criteria Hewitt Associates applied in reaching that conclusion). Hewitt Associates did not render any services to us during fiscal 2008.

 

     Review of Compensation

 

We review the compensation of our executive officers on a regular basis. The Compensation Committee Chairperson and other members of the Compensation Committee also have discussions with management during the year and occasionally request that management prepare or obtain market summaries and survey data regarding executive compensation matters for the Committee’s review. In addition, the Compensation Committee reviews information disclosed in public filings by companies we view to be in our peer group of publicly traded homebuilders (primarily Beazer Homes USA, Inc.; D.R. Horton, Inc.; Hovnanian Enterprises, Inc.; KB Home; M.D.C. Holdings, Inc.; NVR, Inc.; Pulte Homes, Inc.; The Ryland Group, Inc.; Standard Pacific Corp.; and Toll Brothers, Inc.) and it reviews information about compensation levels generally paid by Fortune 500 companies. However, the Compensation Committee has not targeted a particular relationship

between our executive compensation and that of the peer group companies or that of the Fortune 500 companies or any other group of companies.

 

When reviewing and determining the total mix of compensation allocated between short and long-term awards and between cash and equity awards to executive officers, we make individual determinations based upon our compensation objectives of competitive base salaries, performance based cash incentives and equity compensation that we believe will align interests of senior executives with those of stockholders, rather than relying on a set formula or percentage allocation. Accordingly, when we make a compensation award with regard to a particular executive officer, we exercise judgment in determining the mix of compensation we believe to be in line with our compensation objectives for that executive.

 

     Compliance with Internal Revenue Code Section 162(m)

 

When reviewing and setting compensation awards for our executives, one of the things we consider is the potential effect of Section 162(m) of the Internal Revenue Code on the tax deductibility of their compensation. Section 162(m) generally does not allow a publicly-held company to deduct compensation over $1 million paid for any fiscal year to any of the executive officers required to be named in the company’s annual proxy statement. However, Section 162(m) exempts qualified performance-based compensation if certain requirements are met. We generally have structured awards to our executive officers in ways that are intended to qualify for the performance-based compensation exemption under Section 162(m). However, we exercise judgment and may award compensation that does not qualify for tax deductibility under Section 162(m) in order to meet corporate objectives or to adapt to changing circumstances.

 

On November 30, 2009, the Compensation Committee awarded a total of 1,602,500 shares of our Class A common stock to senior executives and key associates, including 500,000 shares, with a date of grant market value of $6,335,000, to Stuart A. Miller, our President and Chief Executive Officer, 250,000 shares, with a date of grant market value of $3,167,500, to each of Jonathan M. Jaffe, our Vice President and Chief Operating Officer, and Richard Beckwitt, our Executive Vice President, 75,000 shares, with a date of grant market value of $950,250, to Bruce E. Gross, our Chief Financial Officer and 30,000 shares, with a date of grant market value of $380,100, to Diane Bessette, our Vice President and Treasurer. When it made the awards, the Compensation Committee was aware that, because the awards were not conditioned on either the associates’ or the Company’s achieving performance goals, Section 162(m) would cause a portion of the awards to Messrs. Miller, Jaffe and Beckwitt not to be deductible. The Compensation Committee felt that, despite this, the Company should not subject the awards to performance goals, because, in view of the uncertainties created by the unusual state of the homebuilding market, the risk of loss of the shares that were awarded would significantly reduce the incentives created by awarding them. The awards are discussed further under “Restricted Stock Awards” in this Compensation Discussion and Analysis.

 

     Use of Compensation Survey Data

 

We use compensation data regarding our peer group of publicly-traded homebuilding companies to analyze compensation decisions in light of current market rates and practices, and to help ensure that our compensation decisions are reasonable in comparison to the compensation paid by our peer group and the value of particular executives to the Company. The peer group compensation data is generally compiled from publicly available information. The publicly traded homebuilding companies we view as being in our peer group are Beazer Homes USA, Inc.; D.R. Horton, Inc.; Hovnanian Enterprises, Inc.; KB Home; M.D.C. Holdings, Inc.; NVR, Inc.; Pulte Homes, Inc.; The Ryland Group, Inc.; Standard Pacific Corp.; and Toll Brothers, Inc.

     Components of Compensation

 

     Base Salary

 

Base salaries paid to our executive officers serve to provide a fixed or base level of compensation to them. When reviewing and setting an executive’s base salary, we consider these factors:

 

 

Due to unfavorable economic conditions with regard to homebuilding, in 2006, we implemented a salary freeze for management, which we continued through fiscal 2009. Accordingly, the base salary of the named executive officers has remained the same for the last three years. The base salary of our Chief Executive Officer has remained unchanged since 2003.

 

Generally, our executives have been awarded base salaries at different levels primarily based on their tenure with us and their level of responsibility. When setting base salaries, we do not use a percentage or ratio that the base salary should be in relation to total compensation, but we believe that incentive compensation should continue to be a significant portion of total compensation.

 

     Bonuses under the Company’s 2007 Incentive Compensation Plan

 

No cash bonuses were awarded to our Chief Executive Officer or any other of our executive officers with regard to fiscal 2008 or 2009. This was a departure from prior years, in recognition of the fact that we had suffered operating losses during 2007, 2008 and 2009.

 

In prior years, we had awarded cash bonuses in accordance with formulas that took account of factors that our management and, with regard to our senior executive officers, the Compensation Committee had deemed relevant to measure the performance of particular associates. In 2007, we adopted the Company’s 2007 Incentive Compensation Plan, which formalized the process for awarding bonuses based upon the extent to which particular associates achieved goals established for them before or shortly after the beginning of a fiscal year. The 2007 Incentive Compensation Plan does not contain specific formulae for determining the incentive compensation to be awarded to particular associates. However, the maximum bonus that may be awarded to any person under the 2007 Incentive Compensation Plan for any fiscal year is the greater of (i) $1.5 million or (ii) 1.5% of our consolidated pre-tax income in that fiscal year. We believe the maximum percentage set in the Company’s 2007 Incentive Compensation Plan to be within the ranges established by others in our peer group.

The formulas we applied with regard to fiscal 2007 (but not to fiscal 2008 or 2009, when we did not pay cash bonuses) for our named executive officers and other senior executive officers were as follows:

 

     Chief Executive Officer, Chief Operating Officer and Executive Vice President

 

The bonuses for our Chief Executive Officer, Chief Operating Officer and Executive Vice President were based on percentages of our pre-tax earnings. Percentages for 2007 depended on our return on capital and diluted earnings per share. In addition, in order for the three executives to reach the maximum percentage of pre-tax earnings, we had to achieve a specified customer satisfaction rating. The percentages and applicable hurdles for each of those three executive officers were:

 

 

The emphasis on return on capital was designed to be consistent with our “balance sheet first” philosophy and was deemed to be an appropriate measure of our performance in conjunction with our operating plan and in comparison to the performance of our peers based on what we believe to be the most important contributor to long-term stockholder value. We believed it was important to include earnings per share because that metric directly aligns the interests of our senior management and our stockholders. We included customer excellence rating to stress the importance of maintaining the high quality of the homes we build.

 

We used percentage of pre-tax earnings as a component of the bonus calculation for these three executive officers because they are responsible for developing and implementing our corporate strategies, and therefore we believed it was appropriate to reward them based on the success or lack of success of those strategies.

 

     Chief Financial Officer and Treasurer/Controller

 

Our five highest paid executive officers during fiscal 2009 included, in addition to our Chief Executive Officer, our Chief Operating Officer, our Executive Vice President, our Chief Financial Officer and our Treasurer.

 

The bonuses for our Chief Financial Officer and our Treasurer (who was our Controller in 2007) under the formulas applied in 2007 were based on percentages of their salaries. The Chief Financial Officer’s target bonus opportunity (i.e., the bonus he would receive if he achieved 100% of his targets) was 250% of his salary and the Treasurer/Controller’s target bonus opportunity was 150% of her salary.

The performance criteria and the percentages of the target award that were applied with regard to these two executive officers were:

 

 

As was the case with the other three named executive officers, the emphasis on return on capital was designed to be consistent with our “balance sheet first” philosophy and was deemed to be a good measure of our performance in comparison to our peers. In addition, we believed it was important to emphasize earnings per share because it is directly aligned with the interests of our stockholders and customer satisfaction because even with regard to these two executive officers, who were not directly involved in our homebuilding or financial services activities, we felt it was important to stress the importance of maintaining the high quality of the homes we build. Since these two executive officers managed our financial reporting process, we felt it was important that a portion of their compensation be based on their adherence to our internal corporate governance policies, which include our internal controls over financial reporting and disclosure controls and procedures. With respect to individual performance criteria, the Chief Financial Officer’s individual performance review was conducted by the Chief Executive Officer and the Treasurer/Controller’s individual performance review was conducted by the Chief Financial Officer and approved by the Chief Executive Officer.

 

The maximum target bonuses for these two executive officers were calculated as percentages of their salaries in order to provide some measure of predictability of bonus amounts from year to year.

For each of fiscal 2008 and 2009, our return on capital and earnings per share were negative, and the Compensation Committee decided not to award bonuses to either our Chief Financial Officer or to our Treasurer/Controller, regardless of the performance scores they achieved.

 

     Stock Option Grants under the Company’s 2007 Equity Incentive Plan

 

Stock option grants are typically made to key associates during the first quarter of a fiscal year after we have had a chance to evaluate our performance for the prior fiscal year. In addition to these annual grants, we sometimes grant options to new associates upon hire or to current associates upon promotion. Each stock option has an exercise price equal to the closing price of our stock on the date of grant, is subject to vesting over a four-year period and expires on the fifth anniversary of the grant date. We believe that stock options provide an important incentive for our associates to maximize stockholder value, because the stock options only have value if our stock price increases after the date of grant. During our 2008 and 2009 fiscal years, we did not make normal annual option awards. However, in July 2008, the Compensation Committee of our Board made option grants to key associates, which are discussed below.

 

In determining the number of shares subject to an option grant, we make a subjective evaluation of:

 

 

     Restricted Stock Awards under the Company’s 2007 Equity Incentive Plan

 

We sometimes award restricted stock to select members of senior management. Restricted stock awards are typically made in the first quarter of a fiscal year in conjunction with the determination of bonuses, if any.

 

We believe that restricted stock closely aligns the long-term interests of recipients with those of our stockholders. Restricted stock grant amounts and other material terms are approved by the Compensation Committee after receiving recommendations from our Chief Executive Officer and other members of our senior management. Restricted stock grants made to the Chief Executive Officer are determined by the Compensation Committee and typically have been for twice the amount awarded to the Chief Operating Officer. Factors considered in determining restricted stock grants include:

 

 

Our Chief Executive Officer and other members of our senior management develop grant recommendations by evaluating the factors above to set a total compensation target for each named executive officer and then design new grants to accomplish those targets, taking into account cash compensation and any stock option grants.

On November 30, 2009, the Compensation Committee awarded a total of 1,602,500 shares of our Class A common stock to senior executives and key associates of which 1,105,000 shares were awarded to our five named executive officers as described under the section “Compliance with Internal Revenue Code Section 162(m).” Of the shares issued, 25% vested upon issuance and an additional 25% will vest on November 30 of each of 2010, 2011 and 2012. If a person to whom shares were issued ceases to be an employee or an officer of the Company or a subsidiary before November 30, 2012, all shares that are not vested at the time the person ceases to be an employee or officer will be forfeited. These shares were awarded in recognition of the fact that, because of market conditions in the homebuilding industry, our senior executives have not received salary increases since fiscal 2006 and no cash bonuses were paid with regard to fiscal 2008 or 2009, even though, in reaction to the decline in the homebuilding market, the Company’s management had been able to reduce the number of associates by more than 70% from 2006 peak levels, had been able to reduce the Company’s maximum recourse exposure related to indebtedness of its unconsolidated joint ventures by more than 80% from November 30, 2006, had changed the Company’s product offerings to reduce their costs and therefore enable us to meet market demand for lower priced homes and helped the Company to accumulate more than $1.3 billion of cash. In addition, the Compensation Committee was concerned that when the homebuilding market recovers and homebuilders begin to expand, there will be aggressive competition for experienced homebuilding executives. The Compensation Committee felt that the ability of award recipients immediately to sell up to 25% of the shares they received would make up in part for the absence of salary increases and cash bonuses, and the gradual three year vesting of the remainder of the shares would create a significant incentive for recipients to continue their employment with the Company. All of the shares in this grant are immediately transferable upon vesting.

 

     Allocation between Restricted Stock and Stock Options

 

In determining how to allocate equity based compensation between stock options and restricted stock, we consider the following factors:

 

 

We believe that restricted stock provides a strong retention incentive in an uncertain market, because it has value even during periods of declining stock prices. Also, because the value of restricted stock reflects the full value of the shares while the value of stock options reflects only the potential for an increase in the price of our shares, restricted stock awards require fewer shares to provide a specified amount of compensation. Amounts realizable from prior grants are generally not taken into account in determining new grants.

 

We do not have any stock ownership guidelines for executive officers or other associates. However, we do have a policy that prohibits all associates from trading in puts, calls or similar options on our stock and from engaging in short sales of our stock.

 

     Other Compensation and Benefits

 

The named executive officers receive vacation, medical, 401(k) and other benefits that are generally available to all of the Company’s associates.

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis. Based on its reviews and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Compensation Committee:
Steven L. Gerard, Chairperson;

Irving Bolotin;

Sherrill W. Hudson;

R. Kirk Landon

Summary Compensation Table

 

The following table sets forth compensation information for our last three fiscal years with regard to (i) our principal executive officer, (ii) our principal financial officer and (iii) our other three most highly compensated executive officers during fiscal 2009, to whom we refer collectively as the “named executive officers.”

 

 

 

 

										Car												Long-Term
										Allowance/Lease				401(k)				Term Life				Disability				Total All Other
		Year				Dividends($)				Payments($)				Match($)				Insurance($)				Insurance($)				Compensation($)
Stuart A. Miller			2009				2,400				22,227				7,350				430				450				32,857
			2008				25,200				25,304				6,900				440				450				58,294
			2007				96,000				26,547				6,750				600				500				130,397
Jonathan M. Jaffe			2009				15,600				16,501				7,350				430				450				40,331
			2008				97,700				16,555				6,900				440				450				122,045
			2007				48,000				16,678				6,750				600				500				72,528
Richard Beckwitt			2009				18,000				11,134				7,350				430				450				37,364
			2008				88,000				16,802				6,900				440				450				112,592
			2007				48,000				16,802				6,750				600				500				72,652
Bruce E. Gross			2009				12,400				8,400				7,350				430				450				29,030
			2008				66,600				8,400				6,900				440				450				82,790
			2007				48,000				8,400				6,750				600				500				64,250
Diane J. Bessette			2009				11,900				7,200				7,350				360				450				27,260
			2008				56,200				7,200				6,900				440				450				71,190
			2007				24,000				7,200				6,750				600				500				39,050

Grants of Plan-Based Awards

 

The following table sets forth information about the plan-based awards that were granted to our named executive officers during fiscal 2009:

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table shows information about outstanding equity awards at November 30, 2009:

 

 

 

 

Option Exercises and Stock Vested

 

The following table sets forth information about option exercises and stock vested during fiscal 2009:

 

 

 

 

Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans

 

We did not have a deferred compensation plan, and no named executive officers deferred any compensation, during fiscal 2009.

Compensatory Plans and Arrangements

 

     Equity Plans

 

We have a 2007 Equity Incentive Plan that provides for the granting of up to 15,000,000 shares of Class A or Class B common stock that may be issuable upon the exercise of stock options or stock appreciation rights, or that may be awarded as shares of restricted common stock or other forms of share based awards, to key officers, associates and Directors. The exercise prices of stock options and stock appreciation rights may not be less than the fair market value of the common stock on the date of the grant. Options granted under the 2007 Plan become exercisable at the time or times determined when the options are granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

 

Since we adopted the 2007 Equity Incentive Plan, it has been the only plan under which we have made equity-based awards to key officers, associates and Directors. The prior plan (the Lennar Corporation 2003 Stock Option and Restricted Stock Plan) terminated when the 2007 Equity Plan was adopted. However, some awards made under prior plans are still outstanding.

 

The Lennar Corporation 2003 Stock Option and Restricted Stock Plan provided for the granting of Class A or Class B stock options and stock appreciation rights and awards of restricted stock to key officers, associates and Directors. No options granted under the 2003 Plan could be exercised until at least six months after the date of the grant. Thereafter, options became exercisable in installments determined when options were granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant. Restricted stock grants could not vest earlier than six months after the date of issuance.

 

The Lennar Corporation 2000 Stock Option and Restricted Stock Plan provided for the granting of stock options and stock appreciation rights relating to Class A common stock and awards of restricted Class A common stock to key officers, associates and Directors. No options granted under the 2000 Plan could be exercised until at least six months after the date of the grant. Thereafter, options became exercisable in installments determined when options were granted. Each stock option and stock appreciation right expires on a date determined at the time of the grant, but not more than ten years after the date of the grant. Restricted stock grants vested over vesting periods determined at the time of the grants.

 

The Lennar Corporation 1997 Stock Option Plan provided for the granting of stock options and stock appreciation rights to key associates to purchase shares of Class A common stock at prices not less than the market value of the stock on the date of grant. No options granted under the 1997 Plan could be exercised until at least six months after the date of grant. Thereafter, exercises were permitted in installments determined when options were granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

 

     Incentive Compensation Plan

 

We have a 2007 Incentive Compensation Plan under which the Compensation Committee of our Board of Directors, or a subcommittee of the Compensation Committee, can establish (or delegate to members of our management, the authority to establish) performance goals for our and our subsidiaries’ officers and key associates and determine formulae on the basis of which bonuses will be awarded to those officers and key associates based upon the extent to which they achieve those performance goals. The formula for a person may relate to how we or a subsidiary, division or other operating unit performs, or how it performs compared with other companies or indexes. Possible performance criteria include, among other things, pre-tax income, after-tax income, per share net income, operating income, return on equity, return on invested capital, stock appreciation, reductions in operating costs, customer satisfaction ratings, number of homes sold or number of mortgages originated.

Compensation Committee Interlocks and Insider Participation

 

During fiscal 2009, Messrs. Bolotin, Gerard, Landon and Hudson served on our Compensation Committee. Mr. Bolotin, who was elected to the Compensation Committee in January 2002, was our Senior Vice President until his retirement in December 1998. During fiscal 2009, none of our executive officers served on the compensation committee or the board of any other entity of which a member of our Compensation Committee was an executive officer or on the compensation committee of any entity of which any of our directors was an executive officer.

 

Certain Relationships and Related Transactions

 

 

     Related Party Transactions Policies and Procedures

 

Our policy, included in our Code of Business Conduct and Ethics, is that all directors, officers and associates must avoid any activity that does or appears to conflict with the interests of the Company. Our directors, officers and associates are aware of the applicable provisions of our Code of Business Conduct and Ethics, and we seek to become aware of related party transactions through periodic reviews by, and notifications to, management, including the completion of an annual Questionnaire for Directors and Executive Officers. We conduct a review of all related party transactions for potential conflicts of interest. Any potential conflicts of interest must be reviewed and approved, if applicable, by our Conflicts Committee if the person involved is someone other than a director or our chief executive officer or, if the person involved is a director or our chief executive officer, by the Audit Committee of the Board of Directors. Our Conflicts Committee consists of our Chief Financial Officer, our Principal Accounting Officer and our General Counsel. During fiscal 2009, there were no transactions with related persons which our policies and procedures did not require to be reviewed, approved or ratified or regarding which our policies and procedures were not followed.

 

     Relationship with LNR Property Corporation

 

In 1997, we transferred our commercial real estate investment and management business to LNR Property Corporation, and spun-off LNR to our stockholders. As a result, LNR became a publicly-traded company, and the family of Stuart A. Miller, our President, Chief Executive Officer and a Director, which had voting control of us, became the controlling shareholder of LNR.

 

Since the spin-off, we have entered into a number of joint ventures and other transactions with LNR. Many of the joint ventures were formed to acquire and develop land, part of which was subsequently sold to us or other homebuilders for residential building and part of which was subsequently sold to LNR for commercial development. In February 2005, LNR was acquired by a company formed by a private equity investment group. Although Mr. Miller’s family was required to purchase a 20.4% minority interest in the acquiring company, that interest is non-voting and neither Mr. Miller nor anyone else in his family is an officer or director, or otherwise is involved in the management, of LNR or its parent. Nonetheless, because the Miller family has a significant minority interest in LNR’s parent, significant transactions with LNR, or entities in which it has an interest, have historically been and continued to be reviewed and subject to approval by the Independent Directors Committee of our Board of Directors.

 

In January 2004, a company of which we and LNR each owned 50% acquired The Newhall Land and Farming Company for approximately $1 billion, including $200 million we contributed and $200 million that LNR contributed (the remainder came from borrowings and proceeds of sales of properties to LNR). Subsequently, we and LNR each transferred our interests in most of our joint ventures to the jointly-owned company that had acquired The Newhall Land and Farming Company, and that company was renamed LandSource Communities Development LLC (“LandSource”). At that time, The Newhall Land and Farming Company owned approximately 35,000 acres in California, much of which was in Los Angeles county.

In February 2007, LandSource admitted MW Housing Partners as a new strategic partner. As part of the transaction, each of Lennar and LNR received a cash distribution of $707.6 million and each of their ownership interests in LandSource was reduced to 16%. As a result of their 20.4% interest in LNR’s parent, the Miller family had an indirect interest in the sum paid to LNR in the LandSource transaction of approximately $144.4 million.

 

In June 2008, LandSource and a number of its subsidiaries commenced proceedings under Chapter 11 of the Bankruptcy Code. In July 2009, as a result of the bankruptcy proceedings, LandSource was reorganized into a new company named Newhall Land Development, LLC, (“Newhall”). The reorganized company emerged from Chapter 11 free of its previous bank debt. As part of the reorganization, we invested $140 million in exchange for approximately a 15% equity interest in the reorganized Newhall, ownership in several communities that were formerly owned by LandSource, the settlement and release of any claims that might have been asserted against us and certain other claims LandSource had against third parties, including LNR. LNR is not a member of Newhall, the reorganized company.

 

     Aircraft Time-Sharing Agreement

 

In August 2005, Stuart Miller, our President and Chief Executive Officer, entered into a Time-Sharing Agreement with one of our subsidiaries which provides that Mr. Miller can sub-lease an aircraft owned by that subsidiary for non-business purposes. Under that Agreement, Mr. Miller pays the subsidiary, out of a prepayment fund established in connection with the agreement, the aggregate incremental cost of each flight based on a list of expenses authorized by federal regulations. The subsidiary retains sole discretion to determine what flights may be scheduled by Mr. Miller, and the Company’s prior planned use of the aircraft takes precedence over Mr. Miller’s non-business use. Mr. Miller paid our subsidiary $229,000 under the agreement for his use of the aircraft during fiscal 2009 (the cost reimbursed by Mr. Miller was calculated in accordance with Federal Aviation Administration regulations).

 

     Aircraft Dry Lease Agreement

 

In addition to reimbursing the Company for personal use of the aircraft, Mr. Miller entered into an Amended and Restated Aircraft Dry Lease Agreement with the Company and a subsidiary that, under Federal Aviation Administration rules, permits Mr. Miller, at his option, to reimburse the Company for our full cost of his business use of the aircraft, which he did in fiscal 2009 by paying us $3.4 million. Our independent Directors approved the Amended and Restated Agreement on January 13, 2009, and it was signed on February 17, 2009. Federal Aviation Administration rules did not permit Mr. Miller to reimburse the Company for business use of the aircraft under his 2005 Aircraft Time-Sharing Agreement.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our Directors, officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership of such securities with the Securities and Exchange Commission. They are required to furnish us with copies of the reports they file pursuant to Section 16(a). Based on our review of the copies of reports we have received, we believe that during fiscal 2009, our Directors, officers and greater than 10% beneficial owners made all required filings on a timely basis.

 

Independent Registered Public Accounting Firm

 

Deloitte & Touche LLP audited our financial statements for our fiscal year ended November 30, 2009. Deloitte & Touche LLP has been our independent registered public accounting firm since fiscal 1994 and our Audit Committee has selected them as our independent registered public accounting firm for fiscal 2010. In “Proposal 2, Ratification of Selection of Independent Registered Public Accounting Firm,” our stockholders

are being asked to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2010. As is described under the discussion of Proposal 2, if our stockholders do not ratify that selection, the effect of that will be to cause the Audit Committee to reconsider whether or not to retain that firm as our independent registered public accountants.

 

We expect representatives of Deloitte & Touche LLP to be present at our 2010 Annual Meeting of Stockholders. These representatives will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

 

The fees billed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”), for various types of professional services and related expenses during the years ended November 30, 2009 and 2008 were as follows:

 

 

Audit services include the audit of our annual financial statements, reviews of our quarterly financial information and consents and comfort letters. Audit-related services primarily include assistance in understanding and applying financial accounting and reporting standards and accounting assistance with proposed transactions. Tax services are tax planning, tax compliance services and tax return preparation. All other fees are fees that do not fall into the other types of services.

 

Audit Committee Pre-Approval Policy

 

The Audit Committee Charter requires that the Audit Committee pre-approve all auditing services (including providing comfort letters in connection with securities offerings) and non-audit services (including tax services) provided to us or our subsidiaries by our independent registered public accounting firm, except for non-audit services covered by a de minimus exception in Section 10A of the Securities Exchange Act of 1934. During fiscal 2009, the Audit Committee pre-approved all services provided by Deloitte.

 

Auditor Independence

 

Our Audit Committee has been informed of the types of services that Deloitte has provided to us and has determined that Deloitte’s providing those services to us is compatible with Deloitte maintaining its independence from us.

 

Report of the Audit Committee

 

The following statement is furnished by the Audit Committee of Lennar Corporation and is not incorporated by reference into any document that we file with the Securities and Exchange Commission.

 

Management has the primary responsibility for producing the Company’s financial statements and for implementing the Company’s financial reporting process, including the Company’s system of internal control over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and issuing a report thereon. The Audit Committee’s responsibility is to assist the Board of Directors in its oversight of the Company’s financial statements. In fulfilling its oversight responsibilities, the Audit Committee reviewed the Company’s audited financial statements for the year ended November 30, 2009 with management, including a discussion of the quality, not just the acceptability, of accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

 

During the course of fiscal 2009, management completed the documentation, testing and evaluation of the Company’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Deloitte & Touche LLP at each Audit Committee meeting. At the conclusion of the process, the Audit Committee reviewed the report of management contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2009 that has been filed with the Securities and Exchange Commission, as well as Deloitte & Touche LLP’s Reports of Independent Registered Public Accounting Firm included in the Company’s Annual Report on Form 10-K related to its audits of: (i) the consolidated financial statements and schedule thereto and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in fiscal 2010.

 

The Audit Committee has discussed with the Company’s independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication with those Charged with Governance. The Audit Committee has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by the PCAOB Ethics and Independence Rule 3526, “Communication with Audit Committee Concerning Independence,” and has discussed with Deloitte & Touche LLP the firm’s independence. The Audit Committee has also considered whether the providing of audit-related and other non-audit services by Deloitte to the Company is compatible with maintaining the firm’s independence.

 

The Audit Committee has evaluated the independent registered public accounting firm’s role in performing an independent audit of the Company’s financial statements in accordance with the standards of the PCAOB and applicable professional and firm auditing standards, including quality control standards. The Audit Committee has received assurances from the independent registered public accounting firm that the audit was subject to its quality control system for its accounting and auditing practice in the United States. The independent registered public accounting firm has further assured the Audit Committee that its engagement was conducted in compliance with professional standards and that there was appropriate continuity of personnel working on the audit and availability of national office consultation to conduct the relevant portions of the audit.

 

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors and the Company’s management that the audited financial statements be included in the Annual Report on Form 10-K for the Company’s fiscal year ended November 30, 2009 that was filed with the Securities and Exchange Commission. By recommending to the Board of Directors and the Company’s

management that the audited financial statements be so included, the Audit Committee is not opining on the accuracy, completeness or presentation of the information contained in the audited financial statements.

 

Audit Committee:
Sherrill W. Hudson, Chairperson;

Irving Bolotin;

Steven L. Gerard;

R. Kirk Landon

 

Proposal 1: Election of Directors

 

Our Board of Directors, upon recommendation of its Nominating and Corporate Governance Committee, has designated the eight persons described in the section of this proxy statement captioned “Board of Directors” as nominees for election as Directors to serve until the next annual meeting of our stockholders. All of the nominees are currently serving as Directors of our company. Directors will be elected by a plurality of the votes cast with regard to the election of Directors. The persons named in the enclosed proxy will vote the proxies they receive for the election of all those nominees, unless a particular proxy card withholds authorization to vote for one or more nominees. Each of the nominees has indicated that he or she is willing and able to serve as a Director. If, before the Annual Meeting, any nominee becomes unable to serve, an event that is not anticipated by the Board of Directors, either the number of directors constituting the entire Board will be reduced or the proxies will be voted for the election of a substitute nominee that the Board of Directors will designate based upon a recommendation from its Nominating and Corporate Governance Committee. We provide biographical information about each nominee for Director in the section of this proxy statement captioned “Biographical Information about Our Director Nominees.”

 

Our Board of Directors unanimously recommends a vote FOR the election of each of the nominees for Director described above. Proxies that are executed and returned will be voted FOR the election of each of those nominees, except to the extent that particular proxies contain instructions not to vote for particular nominees.

 

Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm

 

The Audit Committee of our Board has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending November 30, 2010, and the Board has directed that management submit the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for ratification by the stockholders at the annual meeting. Deloitte & Touche LLP has been the Company’s independent registered public accounting firm since fiscal 1994. Information about the fees paid to Deloitte during our 2008 and 2009 fiscal years can be found in the section of this proxy statement captioned “Independent Registered Public Accounting Firm.”

 

Neither the Company’s Bylaws nor any other governing documents or law require stockholder ratification of the selection of the Company’s independent registered public accounting firm. However, the Board is submitting the selection of Deloitte & Touche LLP to the stockholders for ratification as a matter of what it believes to be good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

 

The affirmative vote of a majority of the votes that are cast with regard to the proposal will be required to ratify the selection of Deloitte & Touche LLP. Abstentions and broker non-votes will not be counted for any purpose in determining whether this matter has been approved.

Our Board of Directors unanimously recommends a vote FOR the proposal to ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm. Proxies that are executed and returned will be voted FOR that proposal except to the extent that particular proxies contain instructions to vote against, or to abstain from voting with regard to, that proposal.

 

Proposal 3: Stockholder Proposal Regarding the Company’s Building Practices

 

This stockholder proposal is sponsored by The Nathan Cummings Foundation and by the Central Laborers’ Pension Fund. The address of, and the number of voting securities held by, each of those stockholders will be provided to any stockholder upon oral or written request made to our General Counsel. Lennar Corporation is not responsible for the content of this stockholder proposal or the statement in support of the proposal.

 

The Proposal

 

STATEMENT IN SUPPORT

 

The Intergovernmental Panel on Climate Change (IPCC) recently concluded that warming of the climate system is unequivocal and that human activity is the main cause. Debate surrounding climate change now focuses not on whether a problem exists but rather on the best means for abatement and adaptation.

 

The rise in average global temperatures resulting from climate change is expected to have significant adverse impacts. According to Business Week, many scientists agree that the warmer temperatures resulting from climate change are causing more powerful storms and perhaps intensifying extreme weather events including droughts and wild fires. Thermal expansion and melting ice sheets are expected to lead to rising sea levels, with significant implications for coastal communities. Rising temperatures will also impact fresh water supplies. California’s Department of Water Resources, for instance, has stated that, “Adapting California’s water management systems to climate change presents one of the most significant challenges for the 21st century.”

 

Climate change also has important economic implications. The Stern Review, often cited as the most comprehensive overview of the economics of climate change, estimated that the cumulative economic impacts of climate change could be equivalent to a loss of up to 20% of average world-wide consumption if action is not taken quickly. A more general pronouncement in the IPCC’s report, Climate Change 2007: Impacts, Adaptation and Vulnerability, observed that “Taken as a whole, the range of published evidence indicates that the net damage costs of climate change are likely to be significant and to increase over time.”

 

According to the Washington Post, “Buildings are the largest source of the greenhouse-gas emissions that are causing global warming, and in the United States, half of building-related emissions are from houses.” The EPA estimates that the residential end-use sector accounted for 21% of CO₂ emissions from fossil fuel combustion in 2007.

 

With residential end-use accounting for such a high proportion of GHG emissions stemming from fossil fuel combustion, a number of recent studies have focused on energy efficiency improvements in residential dwellings as a potential source of emission reductions. One study in The McKinsey Quarterly found that nearly a quarter of cost-effective GHG abatement potential involves efficiency-enhancing measures geared at reducing demand in the buildings and transportation sectors. A second McKinsey study concluded that the residential sector represents the single-largest opportunity to raise energy productivity, noting that, “The adoption of available technologies (including high-efficiency building shells, compact fluorescent lighting, and high-efficiency water heating) would cut ... end-use demand for energy by 32 QBTUs in 2020, equivalent to 5 percent of global end-user demand in that year.”

The Proposed Stockholder Resolution

 

RESOLVED:  Shareholders request that the Board of Directors adopt quantitative goals, based on available technologies, for reducing total greenhouse gas emissions from the Company’s products and operations and report to shareholders by December 31, 2010, on its plans to achieve these goals. Such a report will omit proprietary information and be prepared at reasonable cost.

 

Board Recommendation

 

The Board of Directors unanimously recommends a vote AGAINST this stockholder proposal.