Engaging RiskMetrics on Proxy Voting Matters

Are you waiting for RiskMetrics/ISS to issue a proxy vote recommendation on your proxy?  Has it already done so and you’ve found errors or disagree with anything that was in its report?  Well, then you need to know the rules of engagement, i.e., the engagement policy RiskMetrics has set out for proxy voting matters.  The full policy, set out in a question and answer format, can be found at http://www.riskmetrics.com/policy/EngagingWithISS

Highlights of the policy include:

• With whom does RiskMetrics engage?
  • Corporate issuers, dissident shareholders, and sponsors of shareholder proposals, where it believes that doing so will enable it to produce higher quality research reports for its clients
• Meeting in person or by phone?
  • At the discretion of the analysts. between February 15 to June 30 (proxy season), it will generally not be able to have in-person meetings. Limited exceptions might be made for non-routine or contentious proxy situations.
• Expectations for meetings
  • An informative dialogue ensuring the issuer is informed about RiskMetrics’ policies and procedures, and view of best practices in corporate governance. Prefers to receive written responses to questions.
• Can you note that you’ve purchased services from ISS Corporate Services (ICS)?
  • No, issuers may not disclose publicly (so do not mention in your proxy) or to a RiskMetrics analyst that they have purchased products or services from RiskMetrics/ICS
• Advice on what is needed to get a favorable vote recommendation?
  • RiskMetrics won’t tell you how it will vote or what you need to do to guarantee a particular vote outcome
• Can RiskMetrics use confidential or non-public information?
  • No, RiskMetrics only uses publicly-available information.
• Entitled to review analysis prior to publication?
  • In the U.S., companies in the S&P 500 index generaly receive a draft report for fact-checking on routine proxies.
• S&P 500 company determination date for application of draft review process
  • S&P 500 membership determined as of January 31 for meetings held through June 30, then updated on a real-time basis for the remainder of the year
• What to do when no chance to review and report contains a factual error?
  • Notify RiskMetrics immediately, and if it agrees that there is a material error, it will promptly issue an “Alert” to its clients.Note:In my experience a “material error” is one that would change the analysis presented under a specific RiskMetrics policy and/or be the basis for the vote recommendation of RiskMetrics or its clients. So for example, something like an error in the percent of the annual equity awards granted to the CEO would not be a “material error” that would cause RiskMetrics to issue an Alert.