On January 4, 2010, RiskMetrics issued a set of Frequently Asked Questions on Tax and Governance Havens: International Incorporation Issues.
RiskMetrics identifies the following countries as tax and governance havens:
- Cayman Islands
- Isle of Man
- Marshall Islands
- Netherland Antilles
- Virgin Islands (UK)
So what exactly is the consequence for a company to be incorporated in a tax and governance haven? RiskMetrics’ policy response depends on the type of company involved. Further details along with some examples involving director elections are set forth on page 3 of the FAQs.
RiskMetrics also stats that some countries traditionally thought of as tax havens (such as Switzerland, Luxembourg and Ireland) are not included in the above list because they do not meet both conditions, i.e., they are tax havens, but they do not qualify as governance havens since they have well-defined corporate laws and codes and do not offer the governance flexibility of the governance havens listed. As such, these countries would fall under RiskMetrics’ international voting guidelines.
In the FAQs RiskMetrics indicates that certain companeis are incorporated in these traditional tax havens that do not also qualify as governance havens and may be listed in the U.S. However, RiskMetrics is unwilling to apply its policies on a one-off basis to companies incorporated in such countries that are listed in the U.S. and not to the rest of the companies incorporated there for which sufficient information necessary to undertake a U.S. policy-style analysis is unavailable.
So for companies that had reincorporated to places like Switzerland or Ireland and were hoping RiskMetrics might be persuaded this yer to apply the U.S. policies to their proxies, it looks like they’ll have to wait a bit longer. Interestingly, RiskMetrics concludes the FAQs by looking at the results of its issuer and institution surveys about what policies to apply and concludes that there appears to be no consensus. I take that to mean that until there is a clear desire to have U.S. listed companies that happen to be incorporated in tax havens that are not also governance havens analyzed under U.S. policies, as demonstrated by its annual survey, RiskMetrics will be unlikely to change its position regarding what policy it will apply to such companies.
Full text of the FAQs can be found on RiskMetrics’ website at: