Compensation and Benefits

Compensation and benefits expense to employees and members is comprised of the following:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
	(in thousands)
Cash Compensation and Other Benefits	$	8,719	$	7,689	$	17,293	$	16,077
Non-Cash Compensation	1,180		1,225		2,656		2,445
Total Compensation and Benefits Expense	$	9,899	$	8,914	$	19,949	$	18,522

All non-cash compensation awards granted have varying vesting schedules and are issued at prices equal to the assessed fair market value at the time of issuance, as discussed below. Details of Class B units, phantom Class B units and restricted shares of Class A common stock awarded during the six months ended June 30, 2014 and 2013 are as follows:



	For the Six Months Ended June 30,			For the Six Months Ended June 30,
	2014			2013
	Amount	Fair Value¹		Amount	Fair Value¹
Class B Units	32,479	$	11.76	18,517	$	5.40
Deferred Compensation Phantom Class B Units	22,959	$	11.76	68,518	$	5.40
Restricted Shares of Class A Common Stock	—	$	—	100,000	$	4.41

1 Represents the grant date estimated fair value per share or unit.

Pursuant to the Pzena Investment Management, LLC Amended and Restated 2006 Equity Incentive Plan (“the 2006 Equity Incentive Plan”), the operating company issues Class B units, phantom Class B units and options to purchase Class B units. Under the Pzena Investment Management, Inc. 2007 Equity Incentive Plan (“the 2007 Equity Incentive Plan”), the Company issues shares of restricted Class A common stock and options to acquire shares of Class A common stock. During the three months ended June 30, 2014, 701,299 phantom Class B units were forfeited in connection with employee departures.

Under the Pzena Investment Management, LLC Amended and Restated Bonus Plan (the “Bonus Plan”), eligible employees whose cash compensation is in excess of certain thresholds have a portion of that excess mandatorily deferred. These deferred amounts may be invested, at the employee’s discretion, in certain third-party mutual funds, phantom Class B units, or money market funds. Amounts deferred in any calendar year reduce that year’s cash compensation expense and are amortized and vest ratably over a four-year period commencing the following year. As of June 30, 2014 and December 31, 2013, the liability associated with deferred compensation investment accounts was $1.1 million and $2.3 million, respectively. During the three months ended June 30, 2014, 5,953 phantom Class B units issued under the plan and approximately $1.0 million in deferred compensation investments were forfeited in connection with employee departures.

Pursuant to the Pzena Investment Management, Inc. Non-Employee Director Deferred Compensation Plan (the “Director Plan”), non-employee directors may elect to have all or part of the compensation otherwise payable to the director in cash, deferred in the form of phantom shares of Class A common stock of the Company. Elections to defer compensation under the Director Plan are made on a year-to-year basis. Distributions under the Director Plan shall be made in a single distribution of shares of Class A common stock at such time as elected by the participant when the deferral was made. Since inception of the Director Plan in 2009, the Company’s directors have elected to defer 100% of their compensation in the form of phantom shares of Class A common stock. Amounts deferred in any calendar year are amortized over the calendar year and reflected as General and Administrative Expense. As of June 30, 2014 and December 31, 2013, there were 189,168 and 158,882 phantom shares of Class A common stock outstanding, respectively. For the three and six months ended June 30, 2014 and 2013 no distributions were made under the Director Plan.

The Company issues to certain of its employees delayed-vesting cash awards. For the three and six months ended June 30, 2014 and 2013 no such awards were granted. Previously awarded delayed-vesting cash awards have varying vesting schedules with $1.1 million to be paid at the end of 2014 and the remaining $0.4 million to be paid at the end of 2015.

As of June 30, 2014 and December 31, 2013, the Company had approximately $24.1 million and $29.7 million, respectively, in unrecorded compensation expense related to unvested awards issued pursuant to its Bonus Plan; Class B units, option grants, and phantom Class B units issued under the 2006 Equity Incentive Plan; and restricted Class A common stock issued under the 2007 Equity Incentive Plan. The Company anticipates that this unrecorded cost will amortize over the respective vesting periods of the awards.