Stifel Shakes Up Board, Insiders Step Down
Six Stifel Financial Corp. executives resigned from the St. Louis-based company’s board of directors earlier this week in an effort to reduce “insider” influence, and one gave up his operating responsibilities.
In a filing with the Securities and Exchange Commission, Stifel said that Chief Financial Officer and head of retail brokerage James Zemlyak along with five colleagues in charge of investment banking and capital markets areas resigned as of its annual meeting on June 6 “to reduce the number of inside directors.”
The insiders, who included the former heads of businesses such as Ryan Beck & Co., Keefe Bruyette and Woods and Legg Mason’s capital markets units that Stifel has purchased over the past decade, represented just under one-third of the company’s 20-member board.
Some consulting firms that advise institutional investors on corporate governance had indicated concern about the board makeup, said a person familiar with the issue.
The only insider to give up his managerial duties is Thomas P. Mulroy, who was co-president of the company and co-head of its institutional group with responsibility for institutional equity and fixed income sales, trading and research. Mulroy joined Stifel in 2005 from Legg Mason, where he was in charge of equities.
Victor Nesi, a former Merrill Lynch executive who had been co-head of the institutional group and who also resigned from the board, will remain as sole head of the business.
“I don’t know if this is corporate governance-related or about challenged performance,” said Steven Chubak, a securities analyst at Nomura Instinet who follows Stifel. “It did strike me as unusual to have two guys from institutional on the board.”
Nomura two weeks ago downgraded Stifel to neutral from buy, largely out of concern that its core retail brokerage business will be hurt by revenue declines and potential litigation costs related to the Department of Labor fiduciary rule that becomes partially effective this Friday.
Chubak, who also lowered target price estimates for Raymond James Financial and LPL Financial, said that capital markets activities have been under pressure industrywide because of lower equity trading volume and lack of volatility. The earnings impact of the DOL rule on Stifel and other retail brokerage firms is unlikely to be strong at first but “the risk of the private right to action,” class-action lawsuits that would be permitted as of January 2018 under the rule as currently constructed, is an area Chubak said he is concerned about.
In addition to Zemlyak, Mulroy and Nesi, other executives who resigned from Stifel’s board are:
Richard J. Himelfarb, the head of investment banking who joined Stifel in December 2005 when it bought Legg Mason’s capital markets business; Keefe, Bruyette & Woods President and CEO Thomas B. Michaud, who joined in October 2011 when Stifel CEO Ron Kruszewski pushed deeper into investment banking by buying KBW; and Ben A. Plotkin, the chairman and CEO of Ryan Beck who joined when Stifel bought his firm in 2007.
Zemlyak, Himmelfarb and Plotkin had been vice chairmen of the board.