DEFA14A: First Interstate BancSystem Reduces Proposed Share Increase for 2023 Equity Plan Amid ISS Recommendation

First Interstate BancSystem's board reduces the proposed share increase for its 2023 Equity and Incentive Plan by 2 million shares following concerns raised by ISS and to address potential shareholder apprehension.

Summary

• First Interstate BancSystem is seeking shareholder approval for an increase in the number of shares authorized for issuance under its 2023 Equity and Incentive Plan.
• The Board of Directors has decided to reduce the proposed increase from approximately 5,927,478 shares to approximately 3,927,478 shares, a reduction of 2,000,000 shares.
• This decision was influenced by a recommendation from Institutional Shareholder Services Inc. (ISS) against the original proposal, despite ISS supporting the company's Say on Pay proposal.
• As of April 30, 2024, only approximately 623,300 shares were available for new grants under the 2023 Plan.
• The company anticipates issuing equity awards covering up to approximately 800,000 shares of common stock to employees and directors each year at current market prices.
• The reduced share increase is expected to provide sufficient capacity for the 2023 Plan for the next three years.
• As of April 30, 2024, there were 104,568,019 shares of common stock outstanding.
• The company intends to request that ISS issue an amended report based on the information provided in this supplement reversing its recommendation and supporting a vote FOR Proposal Two.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company is proactively addressing concerns raised by ISS and shareholders, but the need to reduce the share increase suggests potential challenges in attracting and retaining talent if the proposal is not approved.

Positives

• The Board is responsive to shareholder concerns and proxy advisor recommendations.
• The company has a history of strong shareholder support for its executive compensation practices, with over 91% approval for Say on Pay proposals.
• Glass Lewis supports the proposed share increase.
• The reduced share increase is intended to address concerns about potential dilution.
• The company is committed to conservative equity award practices.

Negatives

• ISS initially recommended against the proposed share increase.
• The number of shares available for new grants under the 2023 Plan is limited.
• The company's ability to attract, retain, and motivate employees could be impaired if the share pool is not increased.

Risks

• Failure to obtain shareholder approval for the share increase could limit the company's ability to attract and retain talent.
• If ISS does not reverse its recommendation, it could influence shareholder voting decisions.
• Changes in market conditions or company practices could require further shareholder approval for additional shares in the future.

Future Outlook

The reduced share increase is expected to provide sufficient capacity for the 2023 Plan for the next three years, based on current market conditions and company practices.

Management Comments

• The Board of Directors believes that shareholders have consistently demonstrated their confidence in the Board's determination of the magnitude, type, and manner in which awards are made under the company's equity incentive plans.
• The company believes that unless this pool of shares is increased by the now requested 2,000,000 shares, our ability to attract, retain and motivate our management and other employees will be materially impaired.

Industry Context

Equity compensation plans are a common tool for attracting and retaining talent in the financial services industry. Companies often adjust their plans based on shareholder feedback and proxy advisor recommendations.

Comparison to Industry Standards

• Comparing First Interstate BancSystem's equity compensation practices to peers like U.S. Bancorp, KeyCorp, and Huntington Bancshares would provide a benchmark for assessing the reasonableness of the proposed share increase.
• Analyzing the burn rate (shares granted as a percentage of shares outstanding) and equity overhang (total equity awards outstanding as a percentage of shares outstanding) relative to industry averages would offer further context.
• Reviewing the vesting schedules and performance metrics used in First Interstate BancSystem's equity awards against industry best practices would also be beneficial.

Stakeholder Impact

• Shareholders: The decision impacts potential dilution and the company's ability to attract and retain talent.
• Employees: The decision affects the availability of equity compensation, which is a key component of employee remuneration.
• Management: The decision influences the company's ability to incentivize and retain key personnel.

Next Steps

• Shareholders will vote on the proposed share increase at the Annual Meeting on May 20, 2024.
• The company intends to request that ISS issue an amended report supporting the proposed share increase.

Key Dates

Keywords

Equity Incentive Plan, Share Increase, Proxy Statement, ISS, Shareholders, Compensation, First Interstate BancSystem