Stifel Financial's Shareholders Favor Criticized Stock Plan

Shareholders of Stifel Financial Corp. (NYSE:SF) approved changes to the company’s equity incentive plan which had drawn criticism from a major proxy advisory firm, Institutional Shareholder Services (ISS).

In a filing with the Securities and Exchange Commission, the Missouri-based investment brokerage firm stated that at the annual general meeting held last Wednesday, majority of the shareholders voted in favor of the amendments to the 2001 Incentive Stock Plan and the Equity Incentive Plan for Non-Employee Directors.

The changes in the stock incentive plan would increase capacity by 3 million shares and allow net settlement of restricted stock units for equivalent cash, including for tax or other similar purposes.

The company had earlier noted in its Jun 6 proxy filing that the increased capacity of shares will facilitate the company “to operate our business in the ordinary course and permit us to engage in future acquisitions.” Also, the improved ability to settle awards in cash would lend further flexibility to the company for managing dilution.

Shares of Stifel gained around 2.5% since Thursday, perhaps reflecting investors’ confidence on management regarding its equity incentive proposal.

ISS Concerns

ISS, whose opinion has substantial influence on pension funds and large investors had opposed changes to Stifel Financial's incentive stock plan and urged shareholders to vote against it.

ISS claimed that the stock plan is too costly with excessive “burn rate” (the rate used to measure the annual usage of shares for incentive purposes). Also, it cited that the plan permits liberal recycling.

Stifel Defense

In its defense, Stifel recommended shareholders to vote in favor of the changes in the previous proxy filing. Regarding the issues raised by ISS, the company stated that the ISS approach does not take into account the manner in which Stifel’s acquisition history impacts share usage under its plan.

Stifel stated, “In our view, the approach ISS utilizes proves that one cannot use a “one-size fits all” mathematical framework to determine a recommendation. With respect to recycling, we believe our approach to request shares on an annual basis alleviates this concern.”

Stifel currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance space include LPL Financial Holdings Inc. (NASDAQ:LPLA) , First Bancorp (NYSE:FBP) and Northwest Bancshares, Inc. (NASDAQ:NWBI) , each sporting a Zacks Rank #1 (Strong Buy).