Lincoln National Corporation (LNC) Earnings Call Transcript & Summary

Good morning, and welcome to the Lincoln National Corporation 2020 Annual Meeting of Shareholders. I would now like to turn the call over to Dr. William Cunningham, Chairman of Lincoln National Corporation. Dr. Cunningham, the floor is yours.

Good morning, and welcome to the Lincoln National Corporation 2020 Annual Meeting of Shareholders. I am Bill Cunningham, the Chairman of the Board of Lincoln National Corporation, and I will be chairing today's meeting. In light of the ongoing public health impact of the COVID-19 pandemic and to support the health and well-being of our employees, shareholders and other meeting participants, we are holding this meeting virtually via audio webcast. All of us here at Lincoln hope that you are staying safe and healthy during this challenging time. The agenda for today's meeting is available on the virtual meeting portal as are the meeting rules and procedures. If you have not read the rules of conduct, please take a minute to read them. These are the rules we are going to follow this morning. [Operator Instructions] You may submit any questions now. [Operator Instructions] The meeting will now come to order, and the polls are open for voting. If you are a shareholder or hold a proxy for a shareholder and would like to vote, please follow the voting instructions on the left side of the meeting screen. The polls will be closed after all proposals to be voted on have been presented as indicated in the meeting agenda. Before we address the official business of this meeting, I would like to introduce the other members of the Board of Directors who, along with myself, comprise our director nominees and are all participating virtually this morning. Ms. Deirdre Connelly; Mr. Dennis Glass; Mr. George Henderson; Mr. Eric Johnson; Mr. Gary Kelly; Ms. Leanne Lachman; Mr. Michael Mee; Mr. Pat Pittard; and Ms. Lynn Utter. I would also like to introduce a few of the other people in attendance virtually today. In addition to Dennis Glass, Lincoln's President and Chief Executive Officer, we have Randy Freitag, our Chief Financial Officer and Head of Individual Life; Lisa Buckingham, our Chief People, Place and Brand Officer; and Chris Giovanni, our Corporate Treasurer and Head of Investor Relations, to facilitate the question-and-answer portions of this meeting. Additionally, representatives from our independent registered public accounting firm, E&Y, are also in attendance. The E&Y representatives are available to answer appropriate questions during the question-and-answer session later this morning. I would now like to introduce Nancy Smith, who is our Corporate Secretary. Nancy is going to report on some formal matters related to the holding of this meeting.

Thank you, Mr. Chairman. The duly appointed inspector of elections for this meeting has provided me with an affidavit of mailing attesting to the mailing of the notice of meeting, proxy statement, proxy card, notice of Internet availability and annual report to shareholders. The list of our shareholders of record entitled to notice of this annual meeting is available for inspection by shareholders by following the instructions on the virtual meeting portal. It will remain available for inspection during the meeting. In addition, the inspector of elections has signed an oath of office and has determined that the holders of more than a majority of the shares required for a quorum as specified in the bylaws are present either in person or by proxy. Accordingly, as a quorum is present, the business portion of the meeting is in order to proceed.

Thank you, Nancy. I declare that this meeting is duly constituted and convened. As set forth in the meeting notice, there are 6 items to be voted on at this meeting. The polls are open for these proposals. The preliminary results of the voting will be provided at the conclusion of the vote on all items. There may be shareholders virtually attending the meeting, who have not yet voted or who wish to change their vote. If there are shareholders in either of these categories, please submit your vote through the meeting website. Remember, to vote at this meeting or change your vote, you must have been a shareholder of record on April 7, 2020, or a beneficial owner on that date with an appointment of an agent or legal proxy from the record owner. The first item to be considered today is the election of 10 directors for a 1-year term expiring at the 2021 Annual Meeting of the Shareholders or until their successors shall be elected and shall qualify. I have already introduced the nominees, and additional information about each nominee is available in the proxy statement. The Board of Directors recommends that you vote for each of the nominees. No other timely written notice of nomination was received by the Corporate Secretary in accordance with the bylaws. Therefore, I declare that director nominations are closed. The second item to be considered today is the ratification of the appointment of E&Y as our independent registered public accounting firm for 2020. The representatives from E&Y have been given the opportunity to make a statement and have already informed me that they do not wish to make a statement. The representatives from E&Y will be available to respond to appropriate questions. The Board of Directors recommend that you vote for the ratification of E&Y as the company's independent registered public accounting firm for 2020. The third item to be considered today is a nonbinding advisory resolution seeking approval of the 2019 compensation for our named executive officers as described in the proxy statement. The Board recommends you vote in favor of the nonbinding advisory resolution. The fourth item to be considered today is approval of Lincoln National Corporation's 2020 Incentive Compensation Plan. As set forth in the proxy statement, the Board of Directors recommends a vote for this proposal. I will now pause to address any questions on the 4 management proposals.

Mr. Chairman, we have not received any questions on the management proposals.

The fifth item to be considered today is an advisory shareholder proposal requesting that Lincoln National Corporation amend its bylaw provisions to remove the 1-year holding requirement from a special shareholder meeting right. Shortly, I will recognize a shareholder proponent of this proposal, Mr. John Chevedden, who will have up to 3 minutes to present the proposal. The Board has considered the proponent's proposal and recommends a vote against the proposal. Operator, will you please open the line for Mr. Chevedden to present his proposal.

Thank you. One moment.

Okay. Does the meeting leader hear me?

Yes.

Okay. Proposal 5, make sure the right to call a special meeting more accessible. Shareholders ask our Board to take the steps necessary to amend our bylaws and appropriate governing documents to give the holders of the aggregate of 10% of our outstanding common stock the power to call a special shareholder meeting without the 1-year stockholding requirement. Lincoln National's shareholders permanently lack the right to act by written consent, which makes this proposal all the more important since scores of major companies give shareholders both the right to call a special meeting and the right to act by written consent. Whilst Lincoln National attaches a 1-year holding requirement for stock to participate in calling for a special meeting, this 1-year holding requirement further diminishes the right of shareholders who additionally have no right to act by written consent. Special shareholder meetings allow shareholders to vote on important matters such as electing new directors that can arise between annual meetings. This proposal topic won more than 70% support at Adverse Life Sciences. This proposal topic also won 78% support at a Sprint Annual Meeting with 1.7 billion yes votes. Nuance Communications shareholders gave 94% support to a 2018 shareholder proposal calling for 10% of shareholders to call a special meeting. Making the right to call a special meeting more accessible to shareholders is showing increased support. For instance, this proposal topic won 51% support at O'reilly Automotive in 2019, up from 41% support the year before. A more accessible shareholder ability to call a special meeting would put shareholders in a better position to ask for improvements in our directors. Three directors had 19 to 35 years long tenure. Michael Mee, 19 years; Eric Johnson, 22 years; Leanne Lachman, 35 years. Long tenure can take a toll on the independence of a director. Independence is a priceless attribute in a director. Ms. Lachman received the highest negative director votes in 2019, and Ms. Lachman chaired the Audit Committee. Better performance through improved governance is particularly important at Lincoln National because the stock price has fallen from $56 to $44 in 5 years of a mostly robust market. Please vote yes to make shareholder right to call a special meeting more accessible, proposal 5.

Thank you. The Board's response to this proposal can be found on Pages 90 through 91 of the proxy statement. I will now pause to address any questions submitted on this proposal.

Mr. Chairman, we have not received any questions on this proposal.

There being no questions on this proposal, the discussion is closed. The sixth and final item to be considered today is an advisory shareholder proposal requesting the Board of Directors adopt as policy and amend Lincoln's National Corporation's governing documents as necessary to require the chair of the Board of Directors, whenever possible, be an independent member of the Board. The proponent of this proposal, Mr. Kenneth Steiner, and shortly, I will recognize Mr. Steiner's representative, Mr. Chevedden, who have up to 3 minutes to present the proposal. The Board has considered the proposal and recommends a vote against the proposal. Operator, will you please open the line for Mr. Chevedden to present the proposal.

This is John Chevedden for Kenneth Steiner. Proposal 6, independent board chairman. Can you hear me okay?

Yes.

Shareholders request that our Board of Directors adopt the policy to amend our governing documents as necessary to require that the Chairman of the Board be an independent member of the Board whenever possible. Although it would be better to have an immediate transition to an independent board chairman, the Board would have discretion to phase in this policy for the next Chief Executive Officer transition. This proposal topic won 52% support at the 2020 Boeing Annual Meeting. If the Board determines that a Chairman who was independent when selected is no longer independent, the Board shall select the new Chairman who satisfies the requirements of the policy within a reasonable amount of time. Boeing is an example of a company changing course and naming an independent board chairman in October 2019. Boeing did not wait for the next CEO transition. And Boeing's in better shape than Lincoln National. Boeing's stock is up 40% in 5 years. Lincoln National's stock has fallen from $56 and to $44 in 5 years of a mostly robust market. An independent board chairman will have more time to focus on Board refreshment. Three of our directors, each had from 19 to 35 years long tenure. Long tenure can take a toll on the independence of a director. Independence is a priceless attribute in a director. An independent chairman would have more time to make better arrangements for the annual meeting. Currently, shareholders need to complete a special application to simply submit a question to the annual meeting. It's also more important because we have, like, an interlocking chairmanship. Mr. Cunningham is Chairman at Lincoln National, and he's overseen by Gary Kelly. Meanwhile, Gary Kelly is Chairman of Southwest Airlines, and he's overseen by William Cunningham. This is an unusual and poor governance situation that further points to the need for an independent board chairman. Please vote, yes, independent board chairman, Proposal 6.

Thank you. The Board's response to this proposal can be found on Pages 93 through 95 of the proxy statement. I will now pause to address any questions submitted on this proposal.

Mr. Chairman, we have not received any questions on this proposal.

There being no questions on this proposal, discussion is closed. That concludes the presentation of the proposal set forth in the proxy statement. I will pause briefly to allow shareholders to submit any final votes. While we allow time for shareholders to complete their voting, I would like to remind you that the question-and-answer portion of the meeting may include financial information not prepared in accordance with GAAP. Please see the financial information page in the Investor Relations section of the lincolnfinancial.com for a reconciliation of these results to GAAP results. Additionally, some of the statements may be considered forward-looking. The company cautions investors that actual results could differ materially from the results discussed today. Please see the financial information page in the Investor Relations section of lincolnfinancial.com for a description of factors that could impact forward-looking statements. I now declare the polls officially closed. Nancy, do you have preliminary results of the voting?

Yes, Mr. Chairman. The inspector of elections has determined that based on the votes cast and received, each of the directors have been elected. The appointment of EY has been ratified. The nonbinding resolution approving the compensation of the named executive officers has been approved. The Lincoln National Corporation 2020 Incentive Compensation Plan has been approved. And both the shareholder advisory proposal regarding the amendment to our special shareholder meeting right and the shareholder advisory proposal regarding the requirement to have an independent board chair have not been approved by a majority of the votes cast at this meeting. The final voting results as reflected in the final report of the inspector of elections will be included in the company's -- corporation's current report on Form 8-K reporting on the results of this meeting.

Thank you, Nancy. This now concludes the business of the meeting. Therefore, I declare the meeting is adjourned. We will now move to the Q&A portion of the meeting. Shareholders have had an opportunity to submit questions this morning through the virtual meeting website. [Operator Instructions] If we are not able to address your question this morning, you are welcome to contact our Investor Relations department after today's meeting. Chris, have we received any questions?

Thank you, Mr. Chairman. We have not received any questions from shareholders.

Hearing no questions, that concludes the meeting. We thank you for attending today's meeting and wish you all well.

Ladies and gentlemen, this concludes the meeting. You may now disconnect, and have a pleasant day.