Stifel incentive stock plan still opposed by ISS

Stifel incentive stock plan still opposed by ISS

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NEW YORK (Global Markets) - Stifel Financial's (SF.N) efforts to expand a stock bonus pool may be stymied for a second time after an influential proxy adviser on Friday recommended that the investment bank's shareholders reject an amended, reduced stock plan.

Stifel had a setback on June 1 when shareholders did not approve a proposal to add 6 million shares to the company's incentive-stock program. Proxy advisory firms Institutional Shareholder Services and Glass Lewis & Co had recommended investors oppose the plan, citing their cost to shareholders.

That prompted Stifel to adjourn voting on the proposal until Monday, giving St. Louis-based Stifel time to solicit support from investors. On Monday the bank announced an amended plan that reduced net additional shares by 3.38 million to about 2.63 million.

But ISS on Friday issued a proxy alert that recommended investors again vote down the plan, concluding it still benefits executives at the expense of shareholders.

"As amended, the estimated shareholder value transfer of the restated plan is approximately 57 percent, which continues to exceed the company-specific allowable cap of 20 percent," ISS wrote.

Stifel officials were not available to comment.

Investment banks and brokerages are unlike most public companies, in that a large portion of their income is paid out to employees.

Bonuses paid in shares, which can be substantial, force banks to buy back stock and contain total shares outstanding. Proxy firms like ISS scrutinize stock plans to measure their cost to investors and the rate at which they are paid out.

Stifel Chief Executive Ronald Kruszewski on Monday sent a letter to shareholders seeking their support on the proposal. An existing pool of stock, used as incentive compensation for employees, was running low on shares, he said.

"Our equity incentive plan is both a key element in our compensation structure and a critical tool for recruiting, rewarding, and retaining our employees," Kruszewski wrote.

Stifel's amended plan still requests 6 million new shares, but cancels a provision that would add 1.13 million shares in each of the final three years of a plan expiring in 2018.

The bank has about 3.9 million shares available under an existing plan, and estimates it could exhaust plan shares in two years without a new authorization.

Stifel has said it had 61.9 million shares outstanding at the end of December, on a fully-diluted basis.

Kruszewski said in his Monday letter that the shareholder proxy firms erred when making their calculations.

Their opinions, he said, "are based solely on a formulaic estimate that our plan's cost and our burn rate are higher than they would like them to be."

(Reporting by Joseph A. Giannone)