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UPDATE 1-Sculptor Capital director quits hedge fund in protest over CEO pay

(Adds details about Levin's proposed pay package)

By Svea Herbst-Bayliss

Feb 3 (Reuters) - Sculptor Capital Management said on Thursday that a board member resigned in protest over the pay package the hedge fund firm plans to award its chief executive officer James Levin.

Morgan Rutman, who has been a director since 2019, said he was leaving amid governance failures illustrated by the board's decision to award Levin an annual compensation he called "staggering" and "well in excess of any appropriate comparator."

Sculptor's compensation committee's consultant, Semler Brossy, said Levin's annual compensation for fiscal year 2021 would "almost certainly exceed $100 million and may very well approach $200 million," Rutman wrote in his resignation letter which was attached to a filing Sculptor made on Thursday evening.

The board approved the committee's recommendation for the CEO pay without trying to benchmark it against peers or compare Levin's performance to other asset managers, Rutman wrote.

Rutman said Levin is among the highest paid CEOs in recent years and is slated to receive an equity interest in Sculptor that would exceed the holdings of the founders of Apollo Global Management Inc, Blackstone Inc and KKR & Co Inc in their respective funds.

Sculptor said Rutman's letter was full of "inaccuracies" and "baseless assertions" and that all independent directors except Rutman "believed that the compensation arrangements were in the best interests of the company and its shareholders."

The New York-based firm, previously called Och-Ziff Capital Management, is one of only a handful of publicly traded hedge fund companies and has a market capitalization of about $1.07 billion. It manages $37.9 billion and its stock price climbed 5% over the last year.

The boardroom battle has overtones of a clash between the company and Daniel Och, who founded it in 1994 and had anointed Levin as his likely CEO successor but then changed his mind in late 2017. Och exited the firm in 2019. Rutman is chief executive officer of Och's personal investment firm.

Rutman also objected to permitting Wayne Cohen, who reports directly to Levin, to vote for the approval of the compensation package, saying it was a conflict of interest.

He added the package could not have been approved without Cohen's vote as five votes were required for approval under the company's governance documents. (Reporting by Sohini Podder and Svea Herbst-Bayliss; Editing by Krishna Chandra Eluri and Raju Gopalakrishnan)