Category Corporate Governance

Special Report: Equity Plan Proposal Failures: 2007-2009

The Special Report: Equity Plan Proposal Failures: 2007-2009, Lessons to Consider When Requesting Shares, has been posted on the Special Reports page of this blog under “Reference Materials.”

(Note: you’ll need to have the password to access this page. The password is available to anyone who signs up for Ed’s weekly newsletter in the left-hand side-bar. The password will be automatically e-mailed to you upon sign-up)

In this Special Report, Ed Hauder of Exequity and Reid Pearson of The Altman Group examine the 38 equity plan proposals that failed out of approximately 2,200 total proposals put forward by Russell 3000 companies from 2007 through 2009. The authors detail several lessons for companies to consider when requesting shares, the most significant of which are to ensure that both dilution and burn rate are not excessive.

The Special Report also looks at the success rates of RiskMetrics/ISS’ against vote recommendations for equity plan proposals and finds that they vary, sometimes significantly, based on the industry group. Similarly, the percent of equity plan proposals that failed varies based on industry group. Companies that are considering requesting shareholders to approve additional shares for their equity compensation plans will have a better idea of the challenges they face after reading this Special Report. 

 

Print Friendly, PDF & Email

RiskMetrics Tweaks GRId for Double Trigger Change-In-Control Agreements, Leads to Lower Scores

Does your company have a double trigger change-in-control agreement?  Great!

Did you already look to see how your GRId score came out, i.e., went through the pre-scoring process? Do you think that score will be the one your shareholders will see? Well, as it turns out, it might not be because your company’s GRId compensation score will drop a bit as a result of a May 1 change to GRId by RiskMetrics Group.

RMG decided to revise the scoring for double-trigger change-in-control agreements as of May 1 so that instead of receiving 3 points they would only receive 0 points. The RMG explanation for this is, “[d]ouble trigger change-in-control agreements are standard practice and do not exceed best practices; therefore, the score should be a neutral 0 rather than a 3.”

The net effect of this change will be that companies with double-trigger change-in-control agreements will see their GRId compensation score drop by about 8% (estimate from RMG’s Corporate Service Group). RMG Research should release a more formal communication about this change and will communicate with impacted companies who went through the pre-scoring process.

The latest version of the GRId technical document is available at http://www.riskmetrics.com/sites/default/files/GRId_Tech_Doc.pdf . The changes made to GRId as of May 1 are detailed on page 192.

Print Friendly, PDF & Email

RMG’s GRId Locked

RiskMetrics recently announced that it will replace its Corporate Governance Quotient (CGQ) system with Governance Risk Indicators (GRId).  You can read more about this new system here: http://www.riskmetrics.com/grid-info

GRId launched March 17, 2010. RMG Proxy Research reports published during the second half of March 2010 will display the new GRId metrics. CGQ scores are now frozen and will completely go away by the end of June 2010. As with CGQ, corporate issuers will have an opportunity to review the data used by RMG in developing the company’s GRId assessment, and can also model out changes to determine potential impact under the GRId analysis.  Importantly, unlike CGQ, GRId is an absolute measure of a company’s risk indicators. For more information, corporate issuers can review the FAQs put together by RMG: http://www.riskmetrics.com/sites/default/files/FAQ-GRId-corporate.pdf

Here is a summary of several GRId related services that might benefit corporate issuers:

  • GRId Data VerificationAll covered companies will have access to a complimentary data verification tool enabling users to check the accuracy of their data, request changes to the data, and view GRId indicators which will be updated at this site on a monthly basis. All requests for data verification will be responded to via email within 72 hours. For more information, please access the following link: http://www.riskmetrics.com/data_verification
  • Governance Exchange – Governance Exchange combines research, analytics and engagement to deliver a comprehensive corporate governance solution to corporate issuers. Online discussion forums facilitate constructive dialogue on corporate governance issues between corporate executives, institutional investors and board directors, fostering improved engagement and enabling members to share and advance their own ideas and experiences. In addition, members have access to a diverse range of corporate governance viewpoints and critical information, including webcasts, white papers, surveys, and expert analysis. Corporate issuers also have integrated access to our core governance tools, GRId Analytics (see below), GRId Pre-Scoring (see below), Voting Analytics and Resource Center, resulting in a single online platform to support your corporate governance needs. You also have access to a dedicated team of corporate advisors that specialize in providing data, analytics and reports to executives and board members. For more information, please access the following link: http://www.riskmetrics.com/governance_exchange/issuers
  • GRId Analytics – Subscribers to GRId Analytics have access to new modeling and analytical tools relating to the new GRId methodology. These tools include what if analysis, peer comparisons, new tear sheet GRId reports, new customized reports showcasing your company’s corporate governance strengths, the ability to drill down into the database to identify trends, insights into peer practices, and a dedicated advisor. For more information, please access the following link: http://www.riskmetrics.com/benchmarking/GRId_analytics
  • GRId Pre-Scoring – Subscribers to Governance Exchange will have the ability to obtain unofficial GRId pre-scores. Official GRId scores will be produced on a rolling basis. If a company’s annual meeting is from April-May, their first official GRId score will be published on RiskMetrics Proxy Analysis for that shareholders meeting.  If the annual meeting is before April or after May, the first official pre-score will be available by June 30. Therefore, companies may want to see pre-scores in order to get a sense of where they may stand when their official score is released. This solution provides that capability.

If you are interested in any of the above tools and would like to receive a 10% discount on your purchase of them, please contact me at edward.hauder@exqty.com and I can provide you with information on how you can.

Print Friendly, PDF & Email

RMG Issues FAQs on New SEC Proxy Disclosure Rules

RiskMetrics Group (RMG) recently issued several FAQs related to the new SEC proxy disclosure rules.  Previously, I blogged about the RMG FAQ regarding Compensation Risk Disclosures, and today I will address the two other FAQs, one on compensation consultant conflicts and the other on the enhanced disclosure about directors – qualifications, diversity policies, and board leadership and risk oversight of risk management.

Compensation Consultant Conflicts

RMG was asked whether it would do with compensation consultant fee disclosures.  RMG indicated that since this disclosure is new, it is waiting to gather and analyze the data after the proxy season and develop any new policies in consultation with its clients.  So stay tuned, this one has the feel of the director overboarding issue and the tax gross-up issues which RMG first took some time to study and then came out with policies that directly dealt with the issues.

[poll id=”2″]

Directors Enhanced Disclosures

RMG was asked what its views and the prospects for related voting recommendations were given the new director qualifications, diversity policies, and board leadership and oversight of risk management disclosures. Again RMG deferred a bit indicating that it was waiting to gather information and analyze the disclosures made this proxy season, but would not implement any policy changes as a result of these disclosures for 2010.  My guess is that RMG will study the disclosures made, discuss the issues internally and with its clients and develop a set of new policies for 2011 that will seek to encourage a minimum level of disclosure on these issues and some minimum level of corporate governance as to this items.

[poll id=”3″]

[print_link]

Print Friendly, PDF & Email