DEF: Annaly Capital Management Focuses on Stockholder Engagement and Board Refreshment Ahead of 2025 Annual Meeting

Annaly Capital Management outlines key proposals for its 2025 Annual Meeting, emphasizing stockholder feedback on executive compensation and ongoing board refreshment.

Summary

• Annaly Capital Management is holding its Annual Meeting of Stockholders on May 14, 2025.
• Stockholders will vote on the election of nine directors, advisory approval of executive compensation, ratification of Ernst & Young LLP as the independent accounting firm, and an advisory stockholder proposal regarding written consent.
• The board recommends voting for the election of each director, for the advisory approval of executive compensation, and for the ratification of the accounting firm.
• The board recommends voting against the stockholder proposal regarding written consent.
• The company engaged with stockholders representing approximately 60% of outstanding institutional shares to gather feedback on executive compensation.
• In response to stockholder feedback, the Management Development and Compensation (MDC) Committee approved changes to the executive compensation program, including simplifying the corporate scorecard and increasing the weighting of equity as a percentage of total compensation.
• Three directors, Michael Haylon, Francine J. Bovich, and John H. Schaefer, are concluding their service on the board following the Annual Meeting in accordance with the board refreshment policy.
• Thomas Hamilton has been selected as the successor to Michael Haylon as Independent Chair of the Board.

Sentiment

Score: 7

Explanation: The document is generally positive, highlighting achievements and strategic initiatives. However, it also acknowledges stockholder concerns and the need for improvements in executive compensation, resulting in a moderate sentiment score.

Positives

• The company actively engaged with stockholders to gather feedback on executive compensation.
• The MDC Committee is making changes to the executive compensation program to address stockholder concerns, including simplifying the corporate scorecard and increasing the weighting of equity.
• The board is committed to board refreshment and succession planning.
• The company has a virtual meeting format to allow enhanced participation from its global stockholder base.
• The company has a comprehensive corporate governance framework.

Negatives

• The company's executive compensation program received support of approximately 63% of votes cast at the 2024 Annual Meeting, versus a prior five-year average of approximately 88%, indicating some stockholder dissatisfaction.
• The NLY stock price has fallen from $61 in 2008 to $36 in 2021 and $19 in late 2024 during a robust stock market.

Risks

• The company faces risks related to changes in interest rates, prepayment rates, and the availability of financing.
• There are credit risks related to the company's investments in credit risk transfer securities and residential mortgage-backed securities.
• The company faces operational risks, including cybersecurity incidents.
• The company's ability to maintain its qualification as a REIT is subject to risk.

Future Outlook

The company aims to deliver attractive risk-adjusted returns with lower leverage, lower volatility, and less sensitivity to interest rates.

Management Comments

• In 2024, Annaly capitalized on our advantages to further establish ourselves as the proven industry leader across residential mortgage finance.
• We were proud to welcome stockholders in person and virtually across the globe in November as we traced the Company's evolution, reviewed recent business and operational accomplishments and shared our clear vision for the future.
• We are grateful to the stockholders who shared their feedback, and we believe that the changes we have made address your views and concerns and serve to further enhance the pay-for-performance nature of our executive compensation program.
• On behalf of the entire Board, I want to thank you our stockholders for your essential role in the Company's journey and to invite you to join us for this year's Annual Meeting of Stockholders on May 14th.

Industry Context

Annaly is a leader in the residential mortgage finance market, proven over 27 years across a variety of economic cycles and environments.

Comparison to Industry Standards

• The document mentions a compensation peer group including Affiliated Managers Group, AGNC Investment Corp., Ameriprise Financial, Chimera Investment Corporation, Franklin Resources, Jefferies Financial Group, Lazard Ltd., MFA Financial, New York Mortgage Trust, PennyMac Financial Services, Raymond James Financial, Redwood Trust, Rithm Capital Corp., The Carlyle Group L.P., and Voya Financial.
• The document mentions a performance peer group including AGNC Investment Corp., ARMOUR Residential REIT, Inc., Chimera Investment Corporation, Dynex Capital, Inc., Ellington Financial Inc., Invesco Mortgage Capital, Inc., MFA Financial, Inc., New York Mortgage Trust, Orchid Island Capital, Inc., Redwood Trust, Rithm Capital Corp., and Two Harbors Investment Corp.

Management Changes

Stakeholder Impact

• The changes to executive compensation are intended to better align the interests of executives with those of stockholders.
• The board refreshment policy ensures that the board has the skills and experience necessary to effectively oversee the company.
• The virtual meeting format allows enhanced participation from the global stockholder base.

Next Steps

• Stockholders are encouraged to vote on the proposals outlined in the proxy statement.
• The board will consider the voting results when making future compensation decisions.
• The company will continue to engage with stockholders to gather feedback and address concerns.

Key Dates

Keywords

executive compensation, board of directors, annual meeting, stockholders, corporate governance, proxy statement, MSR, residential credit, agency mortgage REIT, Annaly Capital Management