On November 25, RiskMetrics Group (RiskMetrics) released the 2009 updates to its U.S. Corporate Governance Policy. The policy updates will apply to all shareholder meetings scheduled on or after February 1, 2009. RiskMetrics focused its 2009 U.S. policy updates mainly on issues involving executive compensation, board structure and accounting practices.  

Executive Compensation. The following pay practices, each of which will prompt withhold votes for compensation committee members, have been added to RiskMetrics’ U.S. Poor Pay Practices policy:  

  • adoption of change-in-control arrangements that include tax gross-ups on excise payments triggered by golden parachute payments,
  • tax gross-ups on executive perks,
  • modified “single-trigger” change-in-control provisions that allow a change-in-control payment upon voluntary resignation, and
  • payment of dividends or dividend equivalents on unearned performance awards.  

RiskMetrics will recommend shareholder proposals on “clawbacks” of incentive pay similar to policies required for financial institutions receiving U.S. Treasury TARP funds and proposals seeking holding requirements for executives receiving stock-based incentives. Moreover, the decline of stock price will not be an acceptable reason for repricing or resetting performance goals.  

Board Structure. RiskMetrics will recommend support for shareholder proposals requiring independent chairs but will not recommend proposals requiring new standing board committees.  

Accounting Practices. The Poor Accounting Practices policy, which prompts withhold votes for audit committee members or sometimes the full board, has been updated to include issuers who have received an adverse independent auditor opinion.  

Other Updates. The 2009 policy updates also address director withhold recommendations for poor director attendance and company performance comparisons based on revised total shareholder return criteria; recommendations on proposals related to advance notice bylaw provisions, poison pills, Special Purpose Acquisition Corporation M&A and capital stock authorizations; and various corporate responsibility topics.