DEFA14A: Evercore Urges Shareholders to Support Equity Plan Amidst Glass Lewis Opposition

Evercore is defending its equity plan proposal against a negative recommendation from Glass Lewis, emphasizing its importance for attracting and retaining talent and aligning employee interests with shareholders.

Summary

• Evercore is seeking shareholder support for Proposal No. 4, which requests an increase of 6.0 million shares under its equity incentive plan.
• Glass Lewis (GL) has recommended against the proposal, citing concerns from quantitative tests, despite supporting a similar plan in 2022.
• Evercore argues that its equity plan is crucial for attracting, retaining, and motivating talented employees, which is essential for its growth strategy.
• The company highlights its 5-year total stockholder return of 172% as of December 31, 2023, which outpaces its peers, the S&P 500, and the S&P 500 Financials.
• Evercore emphasizes that it has consistently offset the dilutive effect of equity grants through a share repurchase program, achieving a negative net burn rate of -3.5% over the last 3 years.
• The company criticizes GL's reliance on quantitative tests without qualitative analysis and its comparison to a broad group of financial services companies with an average market capitalization of $37 billion, approximately five times Evercore's size.
• Evercore believes that its broad-based use of equity compensation aligns employee interests with shareholders and allows cash to be returned to shareholders.
• If the proposal fails, Evercore may have to replace equity compensation with cash, reduce the proportion of employees receiving equity, or reduce overall employee compensation, all of which the Board believes would be detrimental to shareholder value.
• Evercore's Board continues to unanimously recommend a vote FOR all proposals.

Sentiment

Score: 6

Explanation: The document expresses concern about the negative recommendation from Glass Lewis but remains confident in the company's strategy and the importance of its equity plan. The tone is defensive but also proactive in addressing shareholder concerns.

Positives

• Evercore has a strong 5-year total stockholder return of 172%, outperforming peers and major indices.
• The company has a negative net burn rate of -3.5% over the last 3 years, demonstrating effective management of dilution through share repurchases.
• Evercore's equity compensation program is broad-based, with over 90% of equity awards going to non-executive officers.
• Shareholders have supported each of Evercore's past three equity plan proposals.
• Glass Lewis supports Evercore's say-on-pay proposal and recognizes the company's pay-for-performance alignment.

Negatives

• Glass Lewis has recommended against Evercore's equity plan proposal.
• Glass Lewis's analysis relies solely on quantitative tests without qualitative analysis.
• Glass Lewis compares Evercore to a peer group with an average market capitalization significantly larger than Evercore's.
• Failure of the equity plan proposal could force Evercore to reduce employee compensation or shift to cash compensation, potentially harming employee alignment and shareholder returns.

Risks

• Failure to secure shareholder approval for the equity plan could hinder Evercore's ability to attract and retain talent.
• Replacing equity compensation with cash could reduce cash available for distribution to shareholders.
• Reduced employee compensation could negatively impact Evercore's ability to execute its long-term strategy.
• Increased competition for top talent could exacerbate the challenges of attracting and retaining employees if the equity plan is not approved.

Future Outlook

Evercore is requesting additional shares to manage and grow its business over the next approximately two to three years, consistent with its strategy.

Management Comments

• Our use of equity has been a key factor in enabling the execution of our growth strategy.
• We have consistently fulfilled our commitment to our shareholders by offsetting the dilutive effect of our equity grants and achieving a negative net burn rate.
• Our equity compensation program is different from many financial services firms; it is very broad-based and administered responsibly.
• We strongly believe that our broad-based use of equity compensation aligns the interests of our employees with shareholders and permits cash to be returned to shareholders.

Industry Context

The document highlights the importance of equity compensation in human capital-based businesses like Evercore, contrasting it with financial services firms that rely more on financial capital. It also discusses the competitive landscape for attracting and retaining talent in the investment banking industry.

Comparison to Industry Standards

• Evercore compares its equity compensation practices to direct public independent investment banking advisory firm peers.
• The document notes that Evercore's three-year average burn rate is in line with its direct peers, such as Lazard, Moelis, PJT Partners, Greenhill, and Perella Weinberg Partners.
• The document criticizes Glass Lewis for comparing Evercore to a broader group of financial services companies, including mortgage REITs and lending firms, which have different capital structures and compensation models.

Stakeholder Impact

• Shareholders: The equity plan aims to align employee interests with shareholder value and support long-term growth.
• Employees: The equity plan is a key component of compensation and retention, motivating employees and aligning their interests with the company's success.
• Customers: Attracting and retaining talented professionals through the equity plan is expected to improve service and drive client satisfaction.

Next Steps

• Shareholders will vote on Proposal No. 4 at the Annual Meeting on June 18th.
• Evercore will continue to engage with shareholders to address any concerns regarding the equity plan.
• Evercore will continue to work with Glass Lewis in the hope that they will develop quantitative measures that accurately reflect the business.

Key Dates

Keywords

equity plan, shareholder, Glass Lewis, compensation, share repurchase, dilution, talent, burn rate, proxy, Evercore