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RiskMetrics Releases 2009 Proxy Voting PoliciesSubmitted by: Sarah Cohn, Communications

RiskMetrics Group today released its 2009 proxy voting policies, culminating an extensive policy formulation and updating process that included outreach to and input from hundreds of institutional investors and corporate issuers. RiskMetrics? policies will be applied to all companies with shareholder meeting dates on or after February 1, 2009.

Clearly, the unprecedented market turmoil has renewed investor and regulatory focus on executive compensation practices, board accountability and oversight, and the quality of financial reporting. In particular, new rules under the U.S. financial bailout bill are targeting compensation issues such as clawbacks and golden parachutes. Accordingly, the three main areas of focus for RiskMetrics? 2009 policy updates are executive compensation, board structure, and audit practices.

Both issuer and investor respondents to RiskMetrics policy survey demonstrated little tolerance for outsized pay packages with 70 percent of investors and 85 percent of issuers specifying pay relative to performance as ?very important? in evaluating executive compensation practices. Thus, RiskMetrics? policy guidelines on executive compensation have been expanded to examine practices that divorce pay from performance, such as tax gross-ups on severance payments and executive perks, and provisions that pay severance for voluntary departures more than a year following a takeover.

RiskMetrics will also assess company performance using a relative approach that is harmonized across several policies, including pay-for-performance and independent chair. Additionally, RiskMetrics has updated its accounting policy guidelines to specify ongoing material weaknesses in Section 404 disclosures and misapplication of GAAP as triggers for in-depth analysis of a company's accounting practices, and to recommend against audit committee members in the case of an adverse opinion from auditors.

Internationally, RiskMetrics has revised its share buyback policy to reflect client feedback and regulatory developments in Europe. RiskMetrics? policy on discharge of directors has been significantly revised ? allowing investors to use the discharge vote to provide a ?yellow card? warning to directors who may not be fulfilling their fiduciary duties. In Canada, RiskMetrics is introducing a Poor Pay Practices Policy to reflect the additional disclosure that is now available in that market.

The 2009 policy updates are accessible through RiskMetrics? online Policy Gateway, which also contains helpful FAQs, summaries of outreach efforts, and other informational resources to provide all market participants with a better understanding of how RiskMetrics formulates and applies its corporate governance policies. In addition to its own policies, the corporate governance policies and philosophies of leading market participants are also available via RiskMetrics? Policy Exchange platform.

On December 4 at 1:00 p.m. EST, RiskMetrics will host a webcast to review its 2009 policy updates. To register for the webcast, please visit here.

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on November 25, 2008 (boomark / email).