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.
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 Verification – All 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.
