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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2009
Commission file number: 001-33928
RiskMetrics
Group, Inc.
(Exact name of registrant as
specified in its charter)
Delaware
|
|
20-8175809
|
(State or other
jurisdiction of
|
|
(IRS Employer
Identification No.)
|
incorporation or
organization)
|
|
|
One Chase
Manhattan Plaza, 44
th
Floor
|
|
|
New York,
New York
|
|
10005
|
(Address of principal
executive offices)
|
|
(Zip Code)
|
(212) 981-7475
(Registrants telephone
number, including area code)
Securities registered
pursuant to Section 12(b) of the Act:
Title of each class:
|
|
Name of Each Exchange on which
Registered
|
Common Stock $.01 par
value
|
|
New York Stock Exchange
|
Securities registered
pursuant to Section 12(g) of the Act:
None
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes
o
No
x
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes
o
No
x
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes
x
No
o
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
o
Indicate by check mark
whether registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer in Rule 12b-2 of the Exchange Act.
(check one):
Large
accelerated filer
o
|
|
Accelerated
filer
x
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
o
|
(Do not check if a smaller reporting company)
|
|
|
Indicate by check mark
whether the Registrant is a shell company (as defined in rule 12b-2 of the
Act). Yes
o
No
x
The aggregate market value
of the registrants voting stock held by non-affiliates of the registrant,
computed by reference to the closing sales price as quoted on June 30, 2009
was approximately $464,096,729.
The number of shares
outstanding of each of the registrants classes of common stock, as of February 18,
2010 was:
Class
|
|
Outstanding
|
Common stock $.01 par
value
|
|
63,265,668
|
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EXPLANATORY NOTE
RiskMetrics
Group, Inc. (the Company) is filing this Amendment No. 1 on Form 10-K/A
(the Form 10-K/A) to amend its Annual Report on Form 10-K for the
fiscal year ended December 31, 2009 (the Form 10-K), which was
filed with the Securities and Exchange Commission (the SEC) on February 24,
2010. The purpose of this Form 10-K/A
is to disclose the information required in Part III, Items 10 through 14,
of the Form 10-K. Accordingly, the
Company hereby amends and replaces in their entirety Items 10 through 14 of the
Form 10-K. Except as described
above, this Form 10-K/A does not amend, update or change any other items
or disclosures in the Form 10-K, including any of the financial
information disclosed in Parts II and IV of the Form 10-K. This Form 10-K/A should be read in
conjunction with the Form 10-K and the Companys other filings with the
SEC.
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RiskMetrics Group
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THIS ANNUAL REPORT ON FORM 10-K
CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES
LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED ON OUR PRESENT INTENT, BELIEFS
OR EXPECTATIONS, AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS
AS A RESULT OF VARIOUS FACTORS. SEE ALSO ITEM 1A. RISK FACTORS. EXCEPT AS
REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR RELEASE ANY FORWARD
LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
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PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Below
is certain information with respect to our directors and executive
officers. Each director or executive
officer may be contacted at our principal executive offices at One Chase
Manhattan Plaza, 44
th
Floor, New York, NY 10005.
As
currently comprised, the Board of Directors is a group of individuals who are
drawn from various market sectors and industry groups with a presence in the
Companys niche markets. The Board, and
the Nominating and Governance Committee in particular, reviews the composition
of the Board for the appropriate skills and characteristics required of members
of the Board in the context of the then current make-up of the Board. This assessment includes consideration of
issues of judgment, integrity, diversity and skills, including, but not limited
to, understanding the business of the Company and possessing a relevant
backgroundall in the context of an assessment of the perceived needs of the
Board at any point in time. While the
Board considers diversity as one of many factors in evaluating the composition
of the Board, it has no set policy in this regard.
Each
of our directors are elected for a term of one year expiring at our next annual
meeting of shareholders and until their respective successor has been elected
and is qualified.
Directors
The following summarizes
some of the key experiences, qualifications, education and other attributes of
our directors:
Ethan Berman
(age
48)
is our chief executive officer and a
member of our board of directors. Mr. Berman was one of our founding
members at the time of our spin-off from JPMorgan in 1998 and has served as our
chief executive officer since such time and as chairman of our board of
directors from June 2004 to June 2009. Prior to our spin-off, Mr. Berman was a
managing director at JPMorgan and was responsible for the firms Risk
Management Services Group. As head of that group, he led JPMorgans risk
advisory work, including the development of risk products and services such as
RiskManager and CreditManager. Mr. Berman joined JPMorgan in 1987 as a
bond trader. Mr. Berman has a B.A. from Williams College.
Lovida Coleman, Jr
(age 60) was appointed as one of our
directors in November 2007. Ms. Coleman has practiced as a lawyer
since 1993 with the law firm of Sutherland Asbill & Brennan LLP and is
on the advisory boards of RAND Corporation, a non-profit think tank. She has an
A.B. from Harvard University and a J.D. from Yale Law School.
Philip Duff
(age 53) has served as one of our directors
since 2001. Mr. Duff has served as chairman and chief executive officer of
Duff Capital Advisors since January 2007 and since 2009 as Chairman of
White Oak Global Advisors, LLC. From January 2000
to 2006, he served as chairman and chief executive officer of FrontPoint
Partners LLC, an investment management firm which he founded. Previous to that,
Mr. Duff was the chief financial officer of Morgan Stanley Dean Witter &
Co. Mr. Duff is currently a director of Ambac Financial Group, Inc.,
a provider of financial guarantees and financial services. Mr. Duff holds a B.A. from Harvard
University and an M.B.A. from the Massachusetts Institute of Technology.
Stephanie Hanbury-Brown
(age 53) has served as one of our directors
since November 2008. Ms. Hanbury-Brown is the Managing Director of
Golden Seeds LLC which she founded in 2004 and which provides investment
capital to early stage, high-growth companies. From 2008 through the
present she has also served as Managing Partner of Golden Seeds Fund LP. Prior to that she spent 20 years working in
the financial services industry in Sydney, London and New York, most recently
as the Head of eCommerce at J.P. Morgan from 1999-2000. She is
currently a member of the board of directors of Foster Wheeler AG, an engineering,
construction and project management contractor and power equipment
supplier. Ms. Hanbury-Brown has a Bachelor of Arts degree from
the University of Sydney.
Rene Kern
(age 46) has served as one of our directors
since June 2004. Mr. Kern is a managing director of General Atlantic
LLC, a global growth equity firm that provides capital and strategic support
for growth companies and has been with General Atlantic LLC since 1996. Mr. Kern joined General Atlantic after
six years with Morgan Stanley in New York and London, where he was a Vice
President in the Investment Banking Division.
Prior to Morgan Stanley, Mr. Kern was a management consultant with
Bain & Company in Boston, MA. Mr. Kern
is currently a director of BM&F Bovespa, the Brazilian Mercantile &
Futures Exchange, Getco LLC, an electronic trading and technology firm, and
Amedes Group, a privately-held clinical lab group. Mr. Kern is a graduate of the University
of Pennsylvania where he obtained an MBA from the Wharton School and an MA from
the School of Arts and Sciences. He
received
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his Bachelors of Science
degree from the University of California, Berkeley.
Christopher Mitchell
(age 38) has served as one of our directors
since 2006. He is a managing director of Spectrum Equity Investors, L.P., a
private equity investor in growth companies and has held that position since December 2005.
From 2001 to December 2005, Mr. Mitchell served as a principal at Spectrum
Equity Investors, L.P. Mr. Mitchell has a A.B. from Princeton University.
Frank Noonan
(age 67) has served as one of our
directors since February 2008. Mr. Noonan
served as chairman and chief executive officer of R.H. Donnelly Co., a print
and interactive marketing company, from 1991 until his retirement in 2002. Mr. Noonan
is currently a director of NewStar Financial, Inc., a specialized
commercial finance company and Avnet, Inc., a distributor of electronic
components and computer products. He has a B.A. from the University of New
Hampshire.
Lynn Sharp Paine
(age 60) has served as one of our directors since June 2008. Ms. Paine is a
John G. McLean
Professor at the Harvard Business School and has served as such since
1998. Since December 2009, she has
also served as Senior Associate Dean of Faculty Development at the School. In addition, she has chaired the Schools
Leadership and Corporate Accountability Group since it was formed in 2003 and
has taught in the Advanced Management Program for executives and the MBA
program since joining the faculty. At
Harvard, Ms. Paine is a Faculty Associate of the Universitys
Edmond J. Safra Foundation Center for Ethics. She is also a
member of the academic advisory board of the Zicklin Center for Business Ethics
Research at Wharton, the academic council of the Hills Program on
Governance at the Center for Strategic and International Studies in Washington,
D.C., and the Governing Board of the Center for Audit Quality. In 2009, she served as a member of the Conference
Boards Task Force on Executive Compensation.
Ms. Paine is a graduate of Smith College, and holds a doctorate in
moral philosophy from Oxford University and J.D. from the Harvard Law School.
Thomas A. Renyi
(age 64) has served as one of our directors
since June 2009. From July 2007
until he retired in August 2008, Mr. Renyi was Executive Chairman of
The Bank of New York Mellon Corporation, New York, New York. Prior to that he served as Chairman of the
Board and Chief Executive Officer of The Bank of New York Company, Inc.,
and The Bank of New York, from February 1998 to July 2007. Mr. Renyi is a member of the board of
directors of Public Service Enterprise Group, a diversified energy company
headquartered in New Jersey, and of The Hartford Financial Services Group, Inc.,
a provider of insurance and investment products. Mr. Renyi holds a B.A. degree in
Business Administration and an M.B.A., both from Rutgers University.
Stephen Thieke
(age 63)
served
as chairman of our board of directors from our inception in 1998 until June 2004,
was re-elected to serve as one of our directors in April 2007 and again
became our chairman in June 2009.
From August 1989 to July 1999, Mr. Thieke worked for
JPMorgan in a variety of senior management positions, including head of fixed
income, business co-head of global markets, president and chairman of JPMorgan
Securities, Inc. and head of the corporate risk management group. Mr. Thieke
served on the board of directors of the Financial Services Authority of the United
Kingdom. From 2008-2009, Mr. Thieke
served as a member of the Global Advisory Board of JER Partners. Mr. Thieke is a member of the board of
directors of PNC Financial Services Group Inc., a regional bank
headquartered in Pittsburgh, Pennsylvania. Mr. Thieke holds a B.A. degree
from Manhattan College.
Robert Trudeau
(age 41)
has
served as one of our directors since September 2005. Mr. Trudeau is
currently a general partner at Technology Crossover Ventures, a private equity
and venture capital firm and has served as such since August 2005. From 2003 to 2005, he was a principal at
General Atlantic Partners. Mr. Trudeau currently serves on the board of
directors of Interactive Brokers Group, Inc., an electronic market maker
and broker, MarketAxess Holdings Inc., a firm operating an electronic trading
platform, and several privately held companies.
He has a B.A.H. in Political Science from Queens University and an
M.B.A. from The University of Western Ontario.
Executive
Officers
David Obstler
is our chief financial officer and has
served as such since January 2005.
From 2000 to 2004, he was chief financial officer and executive vice
president of corporate development for Pinnacor Inc., a NASDAQ publicly
listed provider of software and services to the financial services industry.
Prior to that, he was an investment banker at Goldman Sachs, Lehman Brothers
and JPMorgan. He has a B.A. from Yale University and an M.B.A. from the Harvard
School of Business.
Knut Kjaer
has served as our President since May 2009. P
reviously, from 1997-2007, Mr. Kjaer served as
the chief
2
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executive officer of
Norges Bank Investment Management (NBIM) which oversees the $370 billion
Government Pension Fund and Norways foreign reserves. During 2008 Mr. Kjaer served as an
advisor to NBIM. Prior to heading NBIM, Mr. Kjaer
was the executive vice president of Storebrand, at that time Norways largest
insurance company.
Mr. Kjaer has a masters degree in economics and a degree
in political science from University of Oslo. He has also completed the
advanced management program at Harvard Business School.
Jorge Mina
has served as co-head of our RiskMetrics
business since July 2005. Mr. Mina was one of our founding members at
the time of our spin-off from JPMorgan and served as our head of research from
2003 to 2005, where he was responsible for analytics across RiskMetrics
products and services. Prior to our spin-off, he worked in Risk Management
Services at JPMorgan. Mr. Mina has
an M.S. from the University of Chicago and a B.S. from the Instituto
Tecnológico Autónomo de México.
Stephen Harvey
has
served as part of
our Governance business since 2007, recently becoming the Head of Governance
Services. From 2005-2007, Mr. Harvey
served as Head of Account Management and from 2000-2005 he served as our Head
of Sales.
Biographical data for Ethan Berman, our chief executive officer, is set
forth above under Directors.
None of the executive officers are related to any director of the
Company or to any other executive officer.
Information
Relating to Corporate Governance and the Board of Directors.
Board
Leadership Structure
The Companys Governance
Principles and Board Guidelines call for the Chair of the board to be an
independent director, unless the Board concludes that it is in the best
interests of shareholders to do otherwise.
Accordingly, our board has separated the positions of Chair of the board
and chief executive officer (principal executive officer). Stephen Thieke holds the position of board Chair
and, amongst other responsibilities, leads our board and board meetings. Ethan Berman holds the position of chief
executive officer and leads our management team.
Risk
Oversight Policies
Our board is responsible
for establishing risk oversight policies and this task is principally overseen
by our audit committee. As part of its
charter, our audit committee is responsible for, among other things, oversight
of our risk assessment and management policies and procedures. The audit committee meets regularly with
management to review the Companys policies and procedures with respect to risk
assessment and risk management.
Section 16(a) Beneficial
Ownership Reporting Compliance
Based solely upon
a review of Forms 3, 4 and 5 and amendments thereto furnished to the Company
during and with respect to its 2009 fiscal year, no director, executive officer
or beneficial owner of 10% or more of our common stock failed to file, on a
timely basis, reports required during or with respect to 2009 by Section 16(a) of
the Securities Exchange Act of 1934, as amended, except for Rene Kern, who
inadvertently failed to timely file one report on Form 4 concerning
Company stock he received in lieu of cash compensation he was entitled to as a
director.
Code
of Ethics
The
Company has a Code of Ethics and Business Conduct for its directors, officers
and employees. The Code of Ethics and Business Conduct is available on the
Companys website, www.riskmetrics.com, under the Our Company section. A printed copy is available to any
shareholder requesting a copy by writing to: Corporate Secretary, RiskMetrics
Group, Inc., One Chase Manhattan Plaza, 44
th
Floor, New York, New York 10005. The Company will disclose on its website, in
accordance with all applicable laws and regulations, amendments to, or waivers
from, its Code of Ethics and Business Conduct.
Audit
Committee and Audit Committee Financial Expert
The current members of
our Audit Committee are Ms. Hanbury-Brown and Messrs. Noonan, Renyi
and Thieke, all of whom the Board has determined to be independent as defined
by NYSE rules and the Sarbanes-Oxley Act of 2002 and as applicable to
audit committee members. Mr. Noonan is the Audit Committee Chair and he,
along with Ms. Hanbury-Brown, Mr. Renyi and Mr. Thieke, are our
financial experts under the SEC rules implementing Section 407 of the
Sarbanes-Oxley Act.
3
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Item
11. Executive Compensation
COMPENSATION
DISCUSSION AND ANALYSIS
This section provides an
overview and analysis of our executive compensation program and policies; the
material compensation decisions that we made with regard to our 2009
compensation, as well as the material factors that we considered in making
those decisions. It is divided into four
parts:
I.
|
Compensation
Philosophy and Objectives
|
II.
|
Overview of
Executive Compensation Components
|
III.
|
2009
Compensation Decisions
|
IV.
|
Summary
Compensation Tables
|
Unless otherwise
indicated, this section refers only to the compensation of those individuals
whom we refer to as our named executive officers, or NEOs. These officers are:
·
Ethan Berman, Chief Executive Officer
·
David Obstler, Chief Financial Officer
·
Knut Kjaer, President
·
Jorge Mina, Co-Head of RiskMetrics Business
·
Stephen Harvey, Head of Governance Services
I.
Compensation Philosophy and Objectives
Our compensation program
is under the oversight of the Compensation and Human Resources Committee of our
Board of Directors. As is more fully
articulated in its charter, this Committee:
·
Establishes overall compensation strategy and policy for the Company;
·
Oversees the development and implementation of the performance
evaluation process for our senior executives, including NEOs; and
·
Reviews and approves the compensation for our Chief Executive Officer,
as well as the corporate goals and objectives used to determine the
compensation of other named executive officers.
Our overall compensation
goal is to attract and retain qualified, talented and diverse leaders who are
enthusiastic about our mission and culture.
We believe that compensation plays a role in, but is not the exclusive
means of, achieving this goal.
Non-financial attributes such as offering a compelling work
environment, challenges, opportunities, clients and colleagues also attract
and motivate the type of leaders that we seek.
Because of the importance of these non-financial elements and our
overall company culture, we do not base compensation levels or structures on
peer companies or external benchmarks, nor do we normally employ any
compensation consultants (and we did not employ any in 2009). Instead, compensation is established based on
a combination of each NEOs experience and scope of responsibility, and we look
to combine financial incentives and rewards with non-financial benefits.
We use compensation to
reinforce business objectives and corporate values. We believe that a majority of an executives
compensation should be based on how well that executive performs in achieving
those business objectives over which he/she has reasonable control, as well as
the executives success in exemplifying corporate values. Among our values is the principle of internal
pay equity: that is, the difference between our highest and lowest paid
employees should be equitable. Because
of variances in local compensation structure (for example, as applicable to our
employees in the United States versus certain overseas offices), we do not use
a mathematical multiple-of-pay to determine internal pay equity. These decisions are guided by our collective
sense of what is equitable in each situation.
Additionally, we do not offer special perquisites for executives. Subject to minor variations to account for
requirements in local jurisdictions, all employees receive the same retirement,
health and welfare benefit opportunities.
Because of the discipline that internal pay equity provides, we determine
annual incentive compensation awards for our NEOs (other than the CEO) based
largely on subjective, qualitative factors rather than on a quantitative
basis. (We discuss this more in the
sections which follow, Overview of Executive Compensation Components, and 2009
Compensation Decisions)
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Lastly, we believe that
compensation should align the interests of our executives with our
shareholders. To this end, incentive
compensation paid to each NEO is split between cash and equity. The ratio between cash and equity is
approximately 50-50, but this ratio may change depending upon the level of risk
appropriate for the Company while also considering the appropriate risk for
each executive. While we encourage each
NEO to maintain a level of stock ownership in the Company that is significant
to him/her, the potential equity component of the incentive award is forfeited
once the executive attains in the opinion of the Human Resources and
Compensation Committee a level of equity ownership beyond which additional
equity awards are unlikely to provide additional incentive. We have not established a bright line test as
to when this concept of enough equity is reached; currently, only the Chief
Executive Officers holdings fall within this category.
II.
Overview of Executive Compensation
Components
The following table
describes the components of the Companys executive compensation program.
Pay
Element
|
|
What the Pay Element Rewards
|
|
Purpose of the Pay Element
|
|
|
|
|
|
Base
Salary
|
|
Core
competence as to skills, responsibilities, experience and contributions to
the Company
|
|
Provide
a steady source of income based primarily on scope of responsibility and years
of experience
|
|
|
|
|
|
Annual Cash Incentive
|
|
·
Achievement of specific
business objectives over which the executive has reasonable control
·
Contribution toward
achievement of corporate-wide objectives
·
Development and growth of
leadership and management skills
·
Contribution toward
promoting the Companys distinct culture
·
Success in developing a
productive management team
|
|
·
Ensure focus on specific
annual goals that contribute to the Companys long-term success
·
Provide annual
performance-based cash compensation
·
Motivate achievement of
critical annual performance metrics
·
Enhance leadership,
management and team-building skills
|
|
|
|
|
|
Long Term Incentives
|
|
Periodic Equity Awards under Company-Wide Incentive Compensation Plans
·
Achievement of specific
corporate-level objectives
·
Continued employment with
the Company during the 4-year vesting period
Equity Awards Upon Initial Hire
These options are granted upon initial hire, and vest over a 4-year
period, 25% each year.
Equity Awards Under Annual Incentive Awards
·
Achievement of specific
business objectives over which the executive has reasonable control
·
Contribution toward
achievement of corporate-wide objectives
·
Development and growth of
leadership and management skills
·
Contribution toward
promoting the Companys distinct culture
·
Success in developing a
productive
|
|
Combination of All Plans
·
Align the interests of
executives with shareholders
·
Provide for executive
ownership of stock
·
Retain key talent
Stock Options Upon Initial Hire
·
Attract key talent in a
competitive environment
·
Encourage retention
Equity Awards Under Annual Incentive Awards
·
Ensure focus on specific
annual goals that contribute to the Companys long-term success
·
Motivate achievement of
critical annual performance metrics
·
Supplement cash-based
compensation with potential for long-term growth
|
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Pay
Element
|
|
What the Pay Element Rewards
|
|
Purpose of the Pay Element
|
|
|
|
|
|
|
|
management team
·
Continued
employment with the Company during the 4-year (25% each year) vesting period
|
|
|
|
|
|
|
|
Retirement & Welfare Benefits
|
|
These benefits are part of our broad-based total compensation program,
available to all full-time employees of the Company
|
III.
2009 Compensation Decisions
2009 Corporate Objectives
At the beginning of 2009,
our Board approved the following corporate objectives. These objectives were used by the Compensation
and Human Resources Committee to determine the 2009 incentive compensation for
our Chief Executive Officer, and, to a lesser and more subjective extent, by
our Chief Executive Officer to determine the 2009 incentive compensation for
other NEOs.
a.
ADVANCE THE
VISION OF BECOMING THE CENTER FOR THE FINANCIAL COMMUNITY
·
Actively engage financial
institutions, regulators, and academics with the objectives of enhancing
transparency and addressing industry-wide issues involving risk and governance
·
Increase the Companys
thought-leadership profile in the financial community among our clients, policy
makers, academics and the press
·
Proactively contribute to a
debate on public policy issues through articles, presentations and meetings
with policy makers globally, as well influence changes in regulation and market
practices in the areas of risk and governance
b.
SERVE OUR
CLIENTS
·
Increase aggregate contract
renewal rate by 1%
·
Strengthen our client
relationships by providing at least 10% of our existing institutional clients
an additional product or service
·
Continue to add new clients
to our existing client mix, so that revenues from new sales are split
approximately equally between new and existing clients
c.
DEVELOP OUR
PEOPLE
·
Retain our talent. Decrease voluntary turnover to 7%
·
Advance the RiskMetrics
culture, emphasizing our Success Factors and personal and professional
growth. Measure progress by improvement
in employee survey results from 2008 to 2009.
·
Design and implement a
leadership development program
d.
ENHANCE OUR
OPERATIONS
:
·
Advance towards an operation
that supports the vision of becoming the center for the financial community. Increase the quality of all critical
operations (Data, Voting, Research, Portfolio Risk Software and Services),
including creating enough capacity to be able to process at least five times
the current level of business run through our systems
·
Have no material weaknesses
or significant deficiencies in our 2009 assessment of internal controls over
financial reporting under Section 404 of Sarbanes-Oxley
e.
DELIVER
FINANCIAL PERFORMANCE
·
GAAP revenues in excess of
$320mm
·
Adjusted EBITDA in excess of
$117.5 mm
·
Free cash flow in excess of
$75 mm (1)
·
EBITDA expense growth over
2008 of less than 3%
(1)
We define free cash flow as cash provided by operating activities less capital
expenditures
Base Salary
We pay our executive
officers a base salary to compensate them for their services and to provide a
steady source of income. Base salary is
primarily based on the scope of each executives respective responsibilities,
years of experience, skills, and knowledge, and within the context of our
general compensation philosophy (see above, Compensation
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Philosophy and Objectives). We generally set executive base salary
through an arms-length negotiation with each person during the hiring process,
and make adjustments thereafter to reflect increased experience, years of
service, changes in responsibility, and, as necessary, internal pay equity.
Incentive Compensation
As stated above, we use
compensation to reinforce business objectives and corporate values. We believe that a majority of an executives
compensation should be based on how well that executive performs in achieving
those business objectives over which he/she has reasonable control, his/her
contribution toward corporate-wide objectives, as well as the executives
success in exemplifying our corporate values.
Except for our CEO, we
determine incentive compensation awards based primarily on subjective,
qualitative factors rather than quantitative factors or precise mathematical
formulae. Except for our Chief Executive
Officer, we do not target annual bonus opportunities at any particular
percentage of total compensation or base salary. In connection with his hiring in 2009,
however, an initial target performance bonus was set for Knut Kjaer, our
President, at 2x his annual base salary.
We believe that targets inappropriately limit our ability to fairly
reward performance and distract our employees, and that our strong internal pay
equity principle coupled with our advisory say on pay commitment - protect
the Company and its shareholders from overly generous awards, while still
providing management with the flexibility it needs. We introduced a target bonus amount into our
Chief Executive Officers incentive compensation structure in 2007 because we
recognize that shareholders of a public company are most familiar with this
structure and level of transparency.
1.
Chief Executive Officer
: At the beginning of 2009, our Compensation
and Human Resources Committee determined that our Chief Executive Officers
target bonus for meeting 2009 corporate objectives would be an amount equal to
two times his base salary, half to be paid in cash and half to be paid in
equity. This target bonus amount was
determined after this Committee reviewed compensation levels throughout our
organization, so as to maintain internal pay equity.
At the end of 2009, the
Compensation and Human Resources Committee reviewed our Chief Executive Officers
performance and rated each corporate objective on a scale of one through five
(with a score of four representing achievement of the stated target
objective). Each corporate objective and
key measure was weighted equally. The
Committees assessment was as follows:
7
Table of Contents
PERFORMANCE
OBJECTIVE
|
|
PERFORMANCE
|
|
RATING
|
|
Advance
The Vision
|
|
|
|
1.5
|
|
·
Engage
financial institutions, regulators and academics
|
|
|
|
|
|
·
Increase
thought-leadership profile
|
|
|
|
|
|
·
Proactively
contribute to a debate on public policy issues
|
|
|
|
|
|
Serve
our Clients
|
|
|
|
2.5
|
|
·
Increase
aggregate contract renewal by 1%
|
|
|
|
|
|
·
Strengthen our
client relationships. Provide at least 10% of our existing clients an
addition product or service
|
|
|
|
|
|
·
Continue to
add new clients so that revenues from new sales are split approximately
equally between new and existing clients
|
|
|
|
|
|
Develop
our People
|
|
|
|
3
|
|
·
Decrease the
rate of voluntary turnover to 7%s
|
|
|
|
|
|
·
Advance the
Company culture; measure progress by improvement in employee survey results
|
|
|
|
|
|
·
Design and
implement a leadership development program
|
|
|
|
|
|
Enhance
our Operations
|
|
|
|
3
|
|
·
Advance
towards an operation that supports the vision of becoming the center for the
financial community.
|
|
|
|
|
|
·
Have no
material weaknesses or significant deficiencies in our 2009 assessment of
internal controls over financial reporting under Section 404 of
Sarbanes-Oxley
|
|
|
|
|
|
Deliver
Financial Performance
|
|
|
|
2
|
|
·
GAAP revenues
in excess of $320 million
|
|
|
|
|
|
·
Adjusted
EBITDA in excess of $117.5 million
|
|
|
|
|
|
·
Free cash flow
in excess of $75 million (1)
|
|
|
|
|
|
·
EBITDA expense
growth of less than 3%
|
|
|
|
|
|
Combined
Rating
|
|
|
|
2.4
|
|
(1)
We define free cash flow as
cash provided by operating activities less capital expenditures.
On
the first objective, Advance the Vision, the Compensation and Human Resources
Committee gave Mr. Berman a 1.5 on a scale of 1-5 (5 being the highest, 1
the lowest, with 3 as acceptable, and 4 as target). The Committee did not feel
that Mr. Berman, and the Company overall, were involved enough in the
significant public debate about risk in the global financial markets. While the RiskMetrics brand continued to be
seen positively, the Committee thought that more could have been done to
enhance the brand and the Companys overall position in this important time.
On
the second objective, Serve our Clients, we were also not as successful as we
had planned as renewal rates dropped significantly (rather than increasing),
and we were not able to add as many new clients as we had targeted. While the
Committee believed that the overall market conditions contributed more to these
failures than the delivery of our products and services, they still gave Mr. Berman
a 2.5 on this objective as the Company fell short of target. The Committee
would have given Mr. Berman a lower score on this objective, but client
feedback was generally very positive for the year, and the Company was able to
sell a significant amount of new products to existing clients.
On
the third objective, Develop our People, we did a very good job of retaining
our talent, with voluntary turnover dropping to below our targeted 7%. We also
continued to advance the company culture and remain an award winning employer
of choice in many of our locations. We were not, however, successful in
developing a formal leadership program which was a specific goal for the Company
in 2009. Based on these successes and
failures, the Committee gave Mr. Berman a 3 on this objective.
On
the fourth objective, Enhance our Operations, the Committee was impressed with
the progress made throughout the organization, especially in regards to
internal audit, data security, and financial reporting. The Committee felt, however, that more work
needs to be done in working with clients as our products and services become
increasingly critical to our clients.
The Committee gave Mr. Berman a 3 on this objective.
8
Table of
Contents
On
the fifth objective, Deliver Financial Performance, the Companys performance
was well below expectations and the Committee gave Mr. Berman a 2. Overall, the Company remained financially
sound in a difficult market environment, and the Committee acknowledged the
difficult markets during the year and appreciated the cost controls put in
place at the Company to offset some of the shortcomings in sales. But, that did not offset the fact the
financial results fell short given the Companys growth objectives.
To
determine Mr. Bermans bonus for the year, the Committee took the average
of the scores it gave him on the 5 objectives, (12/5 = 2.4, versus a target of
4) and multiplied that times the target bonus ($350,000 times 2.4/4 =$210,000).
This
amount was paid to Mr. Berman in cash. As discussed earlier,
the Compensation and Human Resources
Committee continues to feel that Mr. Bermans equity holding in the
Company is enough, and consequently this component of his incentive award was
not granted.
2.
All Other NEOs
:
Each NEO other than our CEO also had individual performance goals that
were designed to reflect his/her respective role in the Company and to support
the corporate-wide objectives. Our Chief
Executive Officer, in consultation with the head of our human resources
department, performed an evaluation of each NEOs (a) contribution to the
achievement of our corporate objectives for 2009, and (b) achievement of
individual performance objectives. The
Compensation and Human Resources Committee reviewed these evaluations and
together with our CEO and head of human resources agreed on compensation
packages for the four additional NEOs.
Highlights of these evaluations include, the successful integration our
new president, Knut Kjaer, within the RiskMetrics culture, as well as his
leading the process which led to the development of a 3-year plan that was
presented to our board at the end of 2009.
In light of this performance, Mr. Kjaer received a cash bonus of
$200,000 and a restricted share grant of 15,000 Company shares (vesting over
four years). Our chief financial
officer, David Obstler, was successful in helping to solidify many of the
financial operations of the firm, as well as helping controlling costs in a
difficult year. He was also instrumental
in working with our business heads in setting product strategy for both our
Risk and Governance businesses. Taking
these accomplishments, in conjunction with the overall performance of the
Company as a whole, Mr. Obstler received a cash bonus of $290,000 and a
restricted share grant of 20,000 Company shares. Jorge Mina, our co-head of the Risk business
did not deliver on our revenue forecasts, as we fell short of our targets in
the Risk business for the year. He did,
however, spend a significant part of the beginning of the year exploring new
opportunities for our business including credit ratings and counter party risk,
and he worked to set a detailed and specific plan for growth in 2010. He also helped build to strengthen our client
service organization that helped our Risk clients immensely during the
financial crisis. Mr. Mina received
a cash bonus of $190,000 and a restricted share grant of 10,000 company shares
for his performance for the year. Our
head of the Governance business, Stephen Harvey, also fell short on delivering
on forecasted revenue growth as the overall market environment proved
challenging. He did, however, execute on
two successful acquisitions in the ES&G space, as well as overseeing the
development of a new voting platform and research delivery process. Lastly, he built a strong management team and
significantly reduced the voluntary turnover rate in that business from
previous years. Mr. Harvey received
a cash bonus of $210,000 and a grant of 10,000 restricted shares of Company
stock. In all cases, including the CEO,
the NEOs received less than their expected cash and equity compensation
reflecting the challenges the company faced in 2009 and our falling short of
our stated goals
9
Table of Contents
IV.
Summary Compensation Tables
Summary Compensation Table for
the Years Ended December 31, 2009, 2008 and 2007
Name
and Principal Position
|
|
Year
|
|
Salary
(1)
|
|
Cash
Bonus
(2)
|
|
Option
Awards($)
(3)
|
|
All Other
Compensation
(4)
|
|
Total
|
|
Ethan
Berman,
CEO
|
|
2009
|
|
$
|
350,000
|
|
$
|
210,000
|
|
0
|
|
$
|
4,000
|
|
$
|
564,000
|
|
|
|
2008
|
|
$
|
350,000
|
|
$
|
235,000
|
|
0
|
|
$
|
4,000
|
|
$
|
589,000
|
|
|
|
2007
|
|
$
|
300,000
|
|
$
|
300,000
|
|
0
|
|
$
|
1,000
|
|
$
|
601,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Obstler,
CFO
|
|
2009
|
|
$
|
275,000
|
|
$
|
290,000
|
|
156,369
|
|
$
|
4,000
|
|
$
|
725,369
|
|
|
|
2008
|
|
$
|
275,000
|
|
$
|
300,000
|
|
158,159
|
|
$
|
4,000
|
|
$
|
737,159
|
|
|
|
2007
|
|
$
|
235,000
|
|
$
|
220,000
|
|
181,923
|
|
$
|
1,000
|
|
$
|
637,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knut
Kjaer, President (5)
|
|
2009
|
|
$
|
266,667
|
|
$
|
200,000
|
|
3,139,840
|
|
$
|
100,000
|
|
$
|
3,706,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge
Mina, Co-Head of Risk
|
|
2009
|
|
$
|
190,000
|
|
$
|
190,000
|
|
130,308
|
|
$
|
4,000
|
|
$
|
514,308
|
|
|
|
2008
|
|
$
|
180,000
|
|
$
|
240,000
|
|
132,158
|
|
$
|
4,000
|
|
$
|
556,158
|
|
|
|
2007
|
|
$
|
160,000
|
|
$
|
200,000
|
|
151,603
|
|
$
|
1,000
|
|
$
|
512,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Harvey, Head of Governance
|
|
2009
|
|
$
|
200,000
|
|
$
|
210,000
|
|
130,308
|
|
$
|
4,000
|
|
$
|
544,308
|
|
|
|
2008
|
|
$
|
200,000
|
|
$
|
240,000
|
|
132,158
|
|
$
|
4,000
|
|
$
|
576,158
|
|
(1)
Reflects base salary earned
during the fiscal year.
(2)
Reflects bonus earned during the fiscal year and paid early in the next fiscal
year.
(3)
These amounts represent the grant date fair value, computed in accordance with
FASB ASC Topic 718, of stock option awards granted during the year.
(4)
Represents employer contribution to 401(k) plan for Messrs. Berman,
Obstler, Mina and Harvey. The Other
Compensation for Mr. Kjaer reflects re-location expenses paid to him.
(5)
Mr. Kjaers first day of employment was May 1, 2009. His 2009 base salary was $400,000, of which
he was paid $266,667 for his partial year service.
Grants of Plan-Based Awards Table
for the Year Ended December 31, 2009
Name
and
Principal Position
|
|
Grant Date
(1)
|
|
All Other Option
Awards: Number
of Securities
Underlying
Options (#)
|
|
Exercise or Base
Price of Option
Awards ($/share)
|
|
Grant Date Fair
Value of Stock and
Option Awards
(2)
|
|
Ethan
Berman, CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Obstler, CFO
|
|
2/23/2009(3)
|
|
30,000
|
|
$
|
11.96
|
|
$
|
156,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knut
Kjaer, President
|
|
5/7/2009
|
|
400,000
|
|
$
|
17.43
|
|
$
|
3,139,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge
Mina, Co-Head of Risk
|
|
2/23/2009(3)
|
|
25,000
|
|
$
|
11.96
|
|
$
|
130,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Harvey, Head of Governance
|
|
2/23/2009(3)
|
|
25,000
|
|
$
|
11.96
|
|
$
|
130,308
|
|
(1) The options granted to Messrs. Obstler,
Mina and Harvey each have an expiration date of February 23, 2019 and each
vests in four approximately equal installments on the first, second, third and
fourth anniversaries of December 31, 2008.
The option granted to Mr. Kjaer has an expiration date of May 7,
2019 and vests in equal installments on the first, second, third and fourth
anniversaries of May 1, 2009.
10
Table of Contents
(2)
These amounts represent the
grant date fair value, computed in accordance with FASB ASC Topic 718, of stock
option awards granted during the year.
(3)
These options were granted in February 2009 but were part of bonus
compensation for the 2008 fiscal year.
Option Exercises for the Year
Ended December 31, 2009
Name
and Principal
Position
|
|
Date
|
|
Number of Shares
Acquired on Exercise of
Option (#)
|
|
Value Realized on
Exercise of Option ($)
(1)
|
|
Ethan
Berman, CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Obstler, CFO
|
|
7/27/2009
|
|
8,300
|
|
$
|
109,560
|
|
|
|
7/23/2009
|
|
34
|
|
$
|
448
|
|
|
|
|
|
|
|
|
|
Knut
Kjaer, President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge
Mina, Co-Head of Risk
|
|
6/22/2009
|
|
100
|
|
$
|
1,632
|
|
|
|
6/29/2009
|
|
400
|
|
$
|
6,520
|
|
|
|
7/21/2009
|
|
2,000
|
|
$
|
32,628
|
|
|
|
6/17/2009
|
|
2,000
|
|
$
|
32,600
|
|
|
|
6/30/2009
|
|
1,500
|
|
$
|
24,467
|
|
|
|
|
|
|
|
|
|
Stephen
Harvey, Head of Governance
|
|
11/9/2009
|
|
4,250
|
|
$
|
43,358
|
|
(1) R
epresents the difference
between the fair market value of stock received on the day of exercise less the
option exercise price.
Outstanding Equity Awards at December 31,
2009
Name
and
Principal Position
|
|
Grant Date
|
|
Number of Securities
Underlying Unexercised
Options (#) Exercisable
|
|
Number of Securities
Underlying Unexercised
Options (#) Unexercisable
|
|
Option
Exercise
Price
($/share)
|
|
Option
Expiration
Date
|
|
Ethan
Berman, CEO
|
|
12/31/2001
|
|
125,000
|
|
|
|
2.00
|
|
12/31/2011
|
|
|
|
12/31/2002
|
|
1,375,000
|
|
|
|
2.00
|
|
12/31/2012
|
|
|
|
12/31/2004
|
|
62,500
|
|
|
|
4.80
|
|
12/31/2014
|
|
|
|
1/25/2008
|
|
500
|
|
|
|
17.50
|
|
1/25/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Obstler, CFO
|
|
1/28/2005
|
|
387,500
|
|
|
|
4.80
|
|
1/28/2015
|
|
|
|
12/31/2005
|
|
62,500
|
|
|
|
7.20
|
|
12/31/2015
|
|
|
|
12/31/2006
|
|
28,125
|
|
9,374
|
(1)
|
15.29
|
|
12/31/2016
|
|
|
|
1/25/2008
|
|
15,500
|
|
15,000
|
(2)
|
17.50
|
|
1/25/2018
|
|
|
|
2/23/2009
|
|
7,500
|
|
22,500
|
(3)
|
$
|
11.96
|
|
2/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knut
Kjaer, President
|
|
5/7/2009
|
|
0
|
|
400,000
|
(4)
|
$
|
17.43
|
|
5/17/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jorge
Mina, Co-Head of Risk
|
|
12/31/2000
|
|
19,160
|
|
|
|
1.20
|
|
12/31/2010
|
|
|
12/31/2001
|
|
17,500
|
|
|
|
2.00
|
|
12/31/2011
|
|
|
|
12/31/2002
|
|
12,500
|
|
|
|
2.00
|
|
12/31/2012
|
|
|
|
12/31/2003
|
|
62,500
|
|
|
|
2.40
|
|
12/31/2013
|
|
|
|
12/31/2004
|
|
25,000
|
|
|
|
4.80
|
|
12/31/2014
|
|
|
|
12/31/2005
|
|
99,999
|
|
|
|
7.20
|
|
12/31/2015
|
|
|
|
12/31/2006
|
|
23,438
|
|
7,811
|
(1)
|
15.29
|
|
12/31/2016
|
|
|
|
1/25/2008
|
|
13,000
|
|
12,500
|
(5)
|
17.50
|
|
1/25/2018
|
|
|
|
2/23/2009
|
|
6,250
|
|
18,750
|
(6)
|
11.96
|
|
2/23/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Harvey, Head of Governance
|
|
12/31/2004
|
|
10,000
|
|
|
|
4.80
|
|
12/31/2014
|
|
|
12/31/2005
|
|
53,124
|
|
|
|
7.20
|
|
12/31/2015
|
|
|
|
12/31/2006
|
|
23,438
|
|
7,811
|
(1)
|
15.29
|
|
12/31/2016
|
|
|
|
1/25/2008
|
|
13,000
|
|
12,500
|
(7)
|
17.50
|
|
1/25/2018
|
|
|
|
2/23/2009
|
|
6,250
|
|
18,750
|
(8)
|
11.96
|
|
2/23/2019
|
|
11
Table of Contents
(1) This portion of the option will vest in
full on December 31, 2010.
(2) Of this option, it will vest as to 7,500
underlying shares on December 31, 2010 and as to the remaining 7,500
underlying shares on December 31, 2011.
(3) Of this option, it will vest as to 7,500
underlying shares on December 31, 2010, as to an additional 7,500
underlying shares on December 31, 2011 and as to the remaining 7,500
underlying shares on December 31, 2012.
(4) Of this option, it will vest as to
100,000 underlying shares on May 1, 2010, as to an additional 100,000
underlying shares on May 1, 2011, as to an additional 100,000 underlying
shares on May 1, 2012 and as to the remaining 100,000 underlying shares on
May 1, 2013.
(5) Of this option, it will vest as to 6,250
underlying shares on December 31, 2010 and as to the remaining 6,250 underlying
shares on December 31, 2011.
(6) Of this option, it will vest as to 6,250
underlying shares on December 31, 2010, as to an additional 6,250
underlying shares on December 31, 2011 and as to the remaining 6,250
underlying shares on December 31, 2012.
(7) Of this option, it will vest as to 6,250
underlying shares on December 31, 2010 and as to the remaining 6,250
underlying shares on December 31, 2011.
(8) Of this option, it will vest as to 6,250
underlying shares on December 31, 2010, as to an additional 6,250
underlying shares on December 31, 2011 and as to the remaining 6,250
underlying shares on December 31, 2012.
Employment Letter Agreements with Named Executive Officers
Generally, our
named executive officers do not have employment contracts or agreement. The Company did, however, enter into an
employment letter agreement with Knut Kjaer, our President, in connection with
his hiring in 2009. Under the Agreement,
Mr. Kjaer receives an annual salary of $400,000 and is initially eligible
for an annual bonus targeted at two times his base salary (with the potential
for up to 20% more if his objectives are exceeded by 20%). At the time of his hiring, Mr. Kjaer
received an option grant to purchase 400,000 shares of Company common
stock. The option vests in equal 25% installments over four
years. If, however, during the first two years of his employment,
there is a change of control, a change in the Companys CEO or the Company
terminates his employment without cause, then the first 50% of his option will
automatically vest. Further, if, during the first two years of his
employment, there is a change of control or a change in the Companys CEO and Mr. Kjaer
terminates his employment or the Company terminates his employment for other
than cause, then he will receive the remainder of his base salary that would
otherwise be due from the date of his termination through April 30,
2011. Mr. Kjaer received a
relocation assistance fee of $100,000. Ms. Kjaer is entitled to
participate in the Companys standard employee benefit program, including group
insurance and the Companys 401(k) plan.
2009
Compensation of Non-Employee Directors
Directors who are
full-time employees of the Company receive no additional compensation for their
service as a director. With respect to
non-employee directors, the Companys philosophy is to provide competitive
compensation necessary to attract and retain outstanding people to the Companys
Board. The Board believes that a
significant portion of director compensation should consist of equity-based
compensation to assist in aligning directors interests with the long-term
interests of shareholders. The
Compensation and Human Resources Committee reviews annually the form and amount
of director compensation with independent outside assistance if deemed
necessary, and makes appropriate recommendations to the Board in light of the
responsibilities assumed and the director compensation of similarly situated
companies.
For the 2009-2010
Board year (meaning the 12-month period from June 2009), non-employee
directors received an annual cash retainer of $40,000 and a retainer of $5,000
for each Board committee of which they were a member, except that members of
the Audit Committee received a retainer of $10,000 for service on that
committee given its workload. The
Chairperson of each Board committee received an additional $10,000 retainer
while the Chair of the Audit Committee received an additional retainer of
$20,000. In addition, each director
received 5,000 restricted shares of Company common stock which vest over a
one-year period following issuance but with a three-year holding period. Finally, our Board Chair received a total
annual retainer of $50,000 for his service as Board chair and a total of 7,500
restricted shares of Company common stock.
Directors do not receive separate meeting fees.
12
Table of
Contents
The following table
provides information regarding the compensation of our directors in the year
ended December 31, 2009:
Name
|
|
Fees
Earned
or Paid
in
Cash ($)
|
|
Stock
Awards
($) (1)
|
|
Total ($)
|
|
Ethan
Berman (2)
|
|
|
|
|
|
|
|
Lovida
Coleman
|
|
45,000
|
|
81,300
|
|
126,300
|
|
Philip
Duff
|
|
40,000
|
|
81,300
|
|
121,300
|
|
Stephanie
Hanbury-Brown
|
|
53,750
|
|
81,300
|
|
135,050
|
|
Rene
Kern (3)
|
|
45,000
|
|
81,300
|
|
126,300
|
|
Christopher
Mitchell
|
|
47,500
|
|
81,300
|
|
128,800
|
|
Frank
Noonan
|
|
55,000
|
|
81,300
|
|
136,300
|
|
Lynn
Paine
|
|
45,000
|
|
81,300
|
|
126,300
|
|
Tom
Renyi
|
|
25,000
|
|
81,300
|
|
106,300
|
|
Stephen
Thieke
|
|
62,500
|
|
121,950
|
|
184,450
|
|
Robert
Trudeau
|
|
45,000
|
|
81,300
|
|
126,300
|
|
(1)
These amounts reflect the aggregate grant date fair value of the restricted
stock issued during the 2009 fiscal year, computed in accordance with FASB ASC
Topic 718.
(2)
Mr. Berman received no compensation as a director. See the Summary
Compensation Table above for Mr. Bermans compensation as our chief
executive officer.
(3)
At his election, Mr. Kern received shares of Company stock in lieu of the
cash compensation payments, with the number of shares issued based on closing
price of the Company stock on the date he would have otherwise received a cash
compensation payment.
Compensation Committee Interlocks
and Insider Participation
During 2009, none of our
executive officers served, currently none of them serves and we anticipate that
none will serve in the future, on the board of directors or compensation
committee of any other entity with executive officers who have served or will
serve on our board of directors or our Compensation and Human Resources
Committee.
COMPENSATION
AND HUMAN RESOURCES COMMITTEE REPORT
The Compensation and
Human Resources Committee has reviewed and discussed the preceding Compensation
Discussion and Analysis with management and, based on this review and
discussion, has recommended to the Board of Directors that this Compensation
Discussion and Analysis be included in this Form 10-K/A. In addition, this Committee encourages
shareholders to communicate their views on our compensation philosophy,
policies, objectives and practices, beyond the advisory vote described in more
detail below. These communications can
be addressed to:
Via Email:
|
sayonpay@riskmetrics.com
|
|
|
Mail or Delivery:
|
Corporate Secretary of
RiskMetrics Group, Inc.
|
|
One Chase Manhattan
Plaza, 44
th
Floor
|
|
New York, NY 10005
|
13
Table of Contents
Compensation and
Human Resources Committee
Christopher
Mitchell, Chairman
Stephanie
Hanbury-Brown
Lynn Paine
Robert Trudeau
14
Table of Contents
Item 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
SECURITIES OWNERSHIP OF OFFICERS AND DIRECTORS
AND CERTAIN BENEFICIAL OWNERS
The following table shows
the number of shares of our common stock beneficially owned as of April 19,
2010 by: (i) each of our Directors and Executive Officers, (ii) each
stockholder who is known by the Company to beneficially own in excess of 5% of
the outstanding shares of the Companys common stock, and (iii) all of our
Directors and Officers as a group.
Except as otherwise noted below, the address of each of the persons in
the table is c/o of RiskMetrics Group, Inc., One Chase Manhattan Plaza, 44
th
Floor, New
York, New York 10005.
Beneficial
Owner
|
|
Number
|
|
Percentage#
|
|
|
|
|
|
|
|
Entities
affiliated with T. Rowe Price Associates, Inc. (1)
100 E. Pratt Street
Baltimore, MD 21202
|
|
4,752,209
|
|
6.5
|
%
|
Entities
affiliated with Baron Capital Group, Inc. (2)
767 Fifth Avenue
New York, NY 10153
|
|
4,265,920
|
|
5.8
|
%
|
Entities
affiliated with Morgan Stanley (3)
1585 Broadway
New York, NY 10036
and
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
3,653,164
|
|
5.0
|
%
|
Entities affiliated with General Atlantic LLC(4)
|
|
12,266,332
|
|
16.8
|
%
|
Entities
affiliated with Spectrum Equity Investors IV, L.P.(5)
|
|
10,833,332
|
|
14.8
|
%
|
Entities affiliated with TCV V, L.P.(6)
|
|
6,424,802
|
|
8.8
|
%
|
Ethan Berman (7)
|
|
5,139,960
|
|
7.0
|
%
|
Lovida Coleman
|
|
20,500
|
|
*
|
|
Philip Duff (8)
|
|
135,000
|
|
*
|
|
Stephanie Hanbury-Brown
|
|
7,917
|
|
*
|
|
Rene Kern (9)
|
|
12,280,913
|
|
16.8
|
%
|
Christopher Mitchell (10)
|
|
10,843,332
|
|
14.8
|
%
|
Frank Noonan
|
|
25,500
|
|
*
|
|
Lynn Paine
|
|
10,500
|
|
*
|
|
Tom Renyi
|
|
5,000
|
|
|
|
Stephen Thieke (11)
|
|
57,000
|
|
*
|
|
Robert Trudeau (12)
|
|
8,334
|
|
*
|
|
David Obstler (13)
|
|
547,499
|
|
*
|
|
Knut Kjaer (14)
|
|
415,000
|
|
|
|
Jorge Mina (15)
|
|
91,749
|
|
*
|
|
Stephen Harvey (16)
|
|
125,701
|
|
*
|
|
All directors and executive officers as a group (15
persons)
|
|
29,713,905
|
|
40.7
|
%
|
#
Based on 73,045,930 shares of common stock
outstanding as of April 21, 2010, plus options to purchase common stock
exercisable as of April 21, 2010 or 60 days thereafter and restricted
shares whose restrictions will lapse within 60 days of April 21, 2010.
*
Represents beneficial ownership of less than
1%.
(1)
T. Rowe Price Associates, Inc. has beneficial ownership of these shares as
of December 31, 2009. The
information provided is based upon a Schedule 13G dated February 11, 2010,
filed by T. Rowe Price Associates, Inc.
(2)
Baron Capital Group, Inc. has beneficial ownership of these shares as of December 31,
2009. The information provided is based upon a Schedule 13G/A dated February 12,
2010, filed by Baron Capital Group, Inc.
(3)
Morgan Stanley and Morgan Stanley Investment Management, Inc. have
beneficial ownership of these shares as of December 31, 2009. The
information provided is based upon a Schedule 13G/A dated February 12,
2010, filed by Morgan Stanley.
(4)
Includes 11,316,972 shares
held by General Atlantic Partners 78, L.P., 153,329 shares held by GapStar,
LLC, 617,174 shares held by GAP Coinvestments III, LLC, 166,132 shares held by
GAP Coinvestments IV, LLC and 12,725 shares held by GAPCO GmbH & Co.
KG. General Atlantic LLC is the general partner of General Atlantic Partners
78, L.P. and the sole member of GapStar, LLC. The Managing Members of GAP
Coinvestments III, LLC
15
Table of
Contents
and
GAP Coinvestments IV, LLC are Managing Directors of General Atlantic LLC. The
general partner of GAPCO GmbH & Co. KG is GAPCO Management GmbH. The
Managing Directors of General Atlantic LLC make the voting and investment decisions
with respect to GAPCO Management GmbH and GAPCO GmbH & Co. KG. Rene
Kern is a Managing Director of General Atlantic LLC and a Managing Member
of GAP Coinvestments III, LLC and GAP Coinvestments IV, LLC. Mr. Kern
disclaims beneficial ownership of such shares except to the extent of his
individual pecuniary interest therein. The address for the General Atlantic
entities, other than GAPCO GmbH & Co. KG and GAPCO Management GmbH, is
c/o General Atlantic Service Company, LLC, Three Pickwick Plaza, Suite 200,
Greenwich, Connecticut 06830. The address for GAPCO GmbH & Co. KG and
GAPCO Management GmbH is Koenigsallee 62, 40212 Duesseldorf, Germany.
(5)
Includes 10,643,750 shares
held by Spectrum Equity Investors IV, L.P., whose general partner is Spectrum
Equity Associates IV, L.P.; 48,082 shares held by Spectrum Equity Investors
Parallel IV, L.P. whose general partner is Spectrum Equity Associates IV, L.P.;
and 141,500 shares held by Spectrum IV Investment Managers Fund, L.P. Voting
and investment control over the shares held by Spectrum entities is exercised
by the following members of the Spectrum investment committees: Brian B.
Applegate, William P. Collatos, Benjamin M. Coughlin, Randy J. Henderson,
Michael J. Kennealy, Kevin J. Maroni, Christopher T. Mitchell and Victor E.
Parker, each of whom disclaims beneficial ownership of such shares, except for
their individual pecuniary interest therein. The address of the Spectrum
entities is 333 Middlefield Road, Suite 200, Menlo Park, California
94025.
(6)
Includes 6,305,370 shares of
common stock held by TCV V, L.P.; and 119,432 shares of common stock held by
TCV Member Fund, L.P., and 1,666 restricted shares held by TCV Management 2004
(Management 2004). Technology
Crossover Management V, L.L.C. (TCM V) is the sole General Partner of TCV V,
L.P. and a General Partner of TCV Member Fund, L.P. The investment activities
of TCM V are managed by Jay C. Hoag, Richard H. Kimball, John L. Drew, Jon Q.
Reynolds and William J.G. Griffith IV (collectively, the TCM Members) who
share voting and dispositive power with respect to the shares beneficially
owned by the TCV V, L.P. and TCV Member Fund, L.P. (collectively the TCV Funds).
TCM V and the TCM Members disclaim beneficial ownership of such shares except to
the extent of their individual pecuniary interest therein. The TCM Members are also members of
Management 2004, but disclaim beneficial ownership of the shares owned by
Management 2004 except to the extent of their individual pecuniary interest
therein. The address of TCM V, the TCV
Funds and the TCM Members is 528 Ramona Street, Palo Alto, California 94301.
(7)
Includes options to purchase
1,563,000 shares. Does not include
977,100 shares held in an irrevocable trust for the benefit of Mr. Bermans
children created on August 18, 2000, of which Mr. Bermans wife and
father are the trustees of the irrevocable trust. Also does not include an aggregate of 4,200
shares of common stock held in irrevocable trusts established for the benefit
of Mr. Bermans children on December 20, 2007, of which Mr. John
C. Novogrod is the trustee of each of the irrevocable trusts.
(8) Consists of 10,000 restricted shares and
options to
purchase 125,000 shares.
(9)
Consists of 10,000 restricted
shares issued for compensatory purposes and 4,581 shares issued as stock in
lieu of cash compensation. Also includes
Includes 11,316,972 shares held by General Atlantic Partners 78, L.P., 153,329
shares held by GapStar, LLC, 617,174 shares held by GAP Coinvestments III, LLC,
166,132 shares held by GAP Coinvestments IV, LLC and 12,725 shares held by
GAPCO GmbH & Co. KG. General Atlantic LLC is the general partner of
General Atlantic Partners 78, L.P. and the sole member of GapStar, LLC. The
Managing Members of GAP Coinvestments III, LLC and GAP Coinvestments IV, LLC
are Managing Directors of General Atlantic LLC. The general partner of GAPCO
GmbH & Co. KG is GAPCO Management GmbH. The Managing Directors of
General Atlantic LLC make the voting and investment decisions with respect to GAPCO
Management GmbH and GAPCO GmbH & Co. KG. Rene Kern is a Managing Director of General
Atlantic LLC and a Managing Member of GAP Coinvestments III, LLC and GAP
Coinvestments IV, LLC. Mr. Kern disclaims beneficial ownership of such
shares except to the extent of his individual pecuniary interest therein. Mr. Kern may be deemed to be a member of
a group for purposes of the Securities Act of 1934, and disclaims beneficial
ownership of securities deemed to be owned by the group that are not directly
owned by Mr. Kern.
(10) Consists of 10,000 restricted shares
issued for compensatory purposes. Also
includes
10,643,750 shares held by Spectrum Equity Investors IV, L.P., whose
general partner is Spectrum Equity Associates IV, L.P.; 48,082 shares held by Spectrum
Equity Investors Parallel IV, L.P. whose general partner is Spectrum Equity
Associates IV, L.P.; and 141,500 shares held by Spectrum IV Investment Managers
Fund, L.P. Voting and investment control over the shares held by Spectrum
entities is exercised by the following members of the Spectrum investment
committees: Brian B. Applegate, William P. Collatos, Benjamin M. Coughlin,
Randy J. Henderson, Michael J. Kennealy, Kevin J. Maroni, Christopher T.
Mitchell and Victor E. Parker, each of whom disclaims beneficial ownership of
such shares, except for their individual pecuniary interest therein.
(11) Includes options to purchase 25,000 shares.
(12) Consists of 8,334 restricted shares issued
for compensatory purposes. Mr. Trudeau
has the sole voting and dispositive power over these shares; however,
Management 2004 (as define din footnote 6 above) owns 100% of the pecuniary
interest therein. Mr. Trudeau
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein. Does not
include 1,666 restricted shares previously issued to Mr. Trudeau for
compensatory purposes which were transferred from Mr. Trudeau to
Management 2004. Please see note 6 above
for discussion of the ownership of Management 2004.
(13) Includes
options to purchase 527,499 shares
.
(14)
Includes options to purchase 400,000 shares
.
(15)
Includes options to purchase 81,749 shares
.
(16) Includes options to purchase 115,701 shares.
16
Table
of Contents
Item
13. Certain Relationships and Related
Transactions, and Director Independence
Transactions
with Related Persons
There have been no
transactions between the Company and any related party since January 1,
2009, nor are any currently proposed, for which disclosure is required under
the SEC rules. The Audit Committee,
pursuant to its written charter, is charged with the responsibility of
reviewing certain issues involving potential conflicts of interest, and
reviewing and approving all related party transactions, including those
required to be disclosed as a related party transaction under applicable
federal securities laws. The Audit Committee has not adopted any specific
procedures for conducting such reviews and will consider each transaction in
light of the specific facts and circumstances presented.
Indemnification
Agreements with Directors
We have entered
into customary indemnification agreements with all of our directors.
Director
Independence
The Board annually
assesses the independence of each Director nominee. No director qualifies as independent unless
the Board affirmatively determines that the director has no material
relationship with the Company (either directly or as a partner, shareholder or
officer of an organization that has a relationship with the Company). For purposes of this director independence
classification, material will be defined as a standard of relationship
(financial, personal or otherwise) that a reasonable person might conclude
could potentially influence ones objectivity in the boardroom in a manner that
would have a meaningful impact on an individuals ability to satisfy requisite
fiduciary standards on behalf of shareholders.
Our definition of independent is included in our Governance Principals
and Board Guidelines which are available on our website at www.riskmetrics.com.
Under these
independence standards, and in conformity with the listing standards of the
NYSE, the Board has determined that Lovida Coleman, Stephanie Hanbury-Brown,
Rene Kern, Christopher Mitchell, Frank Noonan, Lynn Paine, Thomas Renyi,
Stephen Thieke and Robert Trudeau, are independent. Ethan Berman is not independent because he is
also our Chief Executive Officer. Philip
Duff is not independent because of a customer contract entered into in May 2008
between the Company and Duff Capital Advisors, of which Mr. Duff was the
CEO and General Partner at the time at which the contract was entered into.
Item
14. Principal Accounting Fees and
Services
In April 2009, the
Audit Committee voted to appoint Deloitte & Touche LLP (Deloitte),
an independent registered public accounting firm, to perform the annual audit
of the Companys consolidated financial statements for the fiscal year 2009,
subject to ratification by the shareholders which was obtained at the Companys
annual meeting of shareholders in June 2009.
The aggregate fees for
professional services rendered to the Company by Deloitte for the years ended December 31,
were as follows:
|
|
2008
|
|
2009
|
|
Audit
Fees (integrated audit of the Companys consolidated financial statements for
the years ended December 31, accounting consultations, reviews of
quarterly financial information, regulatory filings related to the Companys
IPO)
|
|
$
|
1,425,100
|
|
$
|
1,030,000
|
|
Audit
related fees (services related to SAS 70 reports and registration statements)
|
|
194,500
|
|
160,000
|
|
Tax
fees (tax audit assistance)
|
|
|
|
9,000
|
|
All
other fees
|
|
|
|
|
|
Total
Fees
|
|
$
|
1,619,600
|
|
$
|
1,199,000
|
|
17
Table of Contents
Audit Committee Pre-Approval Policy
Audit
and Audit Related Services:
The
Audit Committee, at a minimum, will annually approve the annual audit fee which
includes the annual audit, quarterly review services and statutory audit fees
as outlined in the Independent Auditors annual audit engagement letter. All other audit and audit related services
shall be approved by the Audit Committee with the exception of the following:
·
The Companys Chief
Financial Officer (CFO) may approve audit and audit related fees on an
engagement-by-engagement approach provided that each engagement: i) does not
exceed $50,000 and ii) is in accordance with the Audit Committees policy
objectives including maintaining the independence of the outside auditor. In order to make such determination, the CFO
will receive from the business staff requesting these services a written
explanation of why retention of the Independent Auditor to perform this work
will benefit the Company. The CFO must
also receive from the Independent Auditor a representation that the requested
services will not impair the Independent Auditors independence under
applicable professional standards. If
there is any uncertainty as to whether the engagement will violate the policy
objectives, the CFO will consult with the Audit Committee in order to obtain
approval.
The
approval of such fees will be noted by the signing of an engagement letter.
Non
Audit Services:
All
non-audit services must be approved by the Audit Committee with the exception
of the following:
·
The Companys Chief
Financial Officer (CFO) may approve non- audit related fees on an
engagement-by-engagement approach provided that each engagement: i) does not
exceed $25,000 and ii) is in accordance with the Audit Committees policy
objectives including maintaining the independence of the outside auditor. In order to make such determination, the CFO
will receive from the business staff requesting these services a written
explanation of why retention of the Independent Auditor to perform this work will
benefit the Company. The CFO must also
receive from the Independent Auditor a representation that the requested
services will not impair the Independent Auditors independence under
applicable professional standards. If
there is any uncertainty as to whether the engagement will violate the policy
objectives, the CFO will consult with the Audit Committee in order to obtain
approval.
The
approval of such fees will be noted by the signing of an engagement letter.
18
Table of Contents
Part IV
Item 15.
Exhibits and Financial Statement Schedules
(a)(3.) Exhibits
Exhibit
Number
|
|
Description
|
|
|
|
31.1
|
|
Section 302 Certification of Principal Executive Officer*
|
|
|
|
31.2
|
|
Section 302 Certification of Principal Financial Officer*
|
|
|
|
32.1
|
|
Section 906 Certification of Principal Executive Officer*
|
|
|
|
32.2
|
|
Section 906 Certification of Principal Financial Officer*
|
*
Filed herewith.
19
Table of Contents
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned;
thereunto duly authorized this 30
th
day of April,
2010.
|
RISKMETRICS GROUP, INC.
|
|
|
|
|
|
|
|
By:
|
/s/ M. ETHAN BERMAN
|
|
|
M. Ethan Berman
|
|
|
Chief Executive Officer
|
Pursuant to the requirements
of the Securities Act of 1934, this report has been signed below by the
following persons in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ M. ETHAN BERMAN
|
|
Chief Executive Officer
|
|
April 30, 2010
|
M. Ethan Berman
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
/s/ DAVID M. OBSTLER
|
|
Chief Financial Officer
|
|
April 30, 2010
|
David M. Obstler
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
/s/ ERIC DANIELS
|
|
Global Controller
|
|
April 30, 2010
|
Eric Daniels
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
/s/
LOVIDA COLEMAN, JR.
|
|
Director
|
|
April 30, 2010
|
Lovida Coleman, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ PHILIP DUFF
|
|
Director
|
|
April 30, 2010
|
Philip Duff
|
|
|
|
|
|
|
|
|
|
/s/ STEPHANIE
HANBURY-BROWN
|
|
Director
|
|
April 30, 2010
|
Stephanie Hanbury-Brown
|
|
|
|
|
|
|
|
|
|
/s/ RENE M. KERN
|
|
Director
|
|
April 30, 2010
|
Rene M. Kern
|
|
|
|
|
|
|
|
|
|
/s/ CHRISTOPHER MITCHELL
|
|
Director
|
|
April 30, 2010
|
Christopher Mitchell
|
|
|
|
|
|
|
|
|
|
/s/ FRANK NOONAN
|
|
Director
|
|
April 30, 2010
|
Frank Noonan
|
|
|
|
|
|
|
|
|
|
/s/ LYNN PAINE
|
|
Director
|
|
April 30, 2010
|
Lynn Paine
|
|
|
|
|
|
|
|
|
|
/s/ THOMAS RENYI
|
|
Director
|
|
April 30, 2010
|
Thomas Renyi
|
|
|
|
|
|
|
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/s/ STEPHEN THIEKE
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Director
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April 30, 2010
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Stephen Thieke
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/s/ ROBERT TRUDEAU
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Director
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April 30, 2010
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Robert Trudeau
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20
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