RiskMetrics Group has published some guidance for companies, in the form of three frequently asked questions, about how its voting policies may apply to some of the disclosures required under the Securities and Exchange Commission's new proxy disclosure rule.
The rule adopted by the SEC in December, which includes new disclosure about risk-management oversight, "risky" compensation, and director qualifications, among other things, are effective for proxy statements issued on or after Feb. 28, 2010, by companies with a fiscal year ending on Dec. 15, 2009 or later.
RMG says the FAQs are intended to provide "high-level guidance regarding the way in which the RMG Research Department will generally view certain issues in the context of preparing proxy analyses and vote recommendations for U.S. companies," but shouldn't be construed as "a guarantee as to how RMG's Research Department will apply its benchmark policy in any particular situation."
Topics addressed include what RiskMetrics will look for in the new disclosure requirement on risks raised by compensation programs, and how it will view non-disclosure, how it will analyze compensation consultant fee disclosures, and views and the prospects for related voting recommendations regarding the new disclosures on director qualifications, diversity policies, and board leadership and oversight of risk management.
Noting that some companies may say nothing in their proxy statement, rather than make a negative disclosure, if they conclude they have no material adverse risks caused by pay, RMG says that, while it doesn't have a policy regarding non-disclosure, it advises issuers to, "at a minimum, talk about their process and any mitigating features (such as claw-backs or bonus banks) that they have adopted."
With respect to compensation consultant fee disclosures, RMG said since the data is brand new, it won't apply any formula or any specific policy with regard to fees (i.e. raising concerns if fees for other services exceed fees for compensation consulting). Rather, RMG says it will analyze the issue after proxy season and will then "develop, in consultation with clients, any policy guidelines that are warranted."
RMG also said it's too early to speculate about potential policy changes related to the new disclosures on director qualifications, diversity policies, and board leadership and oversight of risk management.
Additional information clarifying directors' qualifications "will not be determinative in any recommendation but rather will provide additional insight that may be considered in overall evaluations, as warranted," the FAQs state.
With respect to board leadership and diversity and the board's oversight of risk management, RMG hasn't made any policy changes related to director elections in 2010.
"We look forward to seeing substantive discussion of these issues, and will incorporate meaningful information into analysis of related shareholder proposals, as appropriate, although RMG policy regarding those proposals is unchanged for 2010," RMG says.