Proxy Blog

Moody’s Corporation 

April 1, 2020

The annual proxy for this credit rating business had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposals to remove supermajority requirements on amendments, removal of directors, and open board seats at special meetings 

Magni voted as follows: 

  1. For and against proforma proposals.
    -For directors – The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. The compensation levels are set using a benchmarking process.
    -For auditors  There appear to be no controversies with the financial statements of the company.
    -Against “Say-on-pay” Advisory Vote – The proxy materials did not discuss shareholder engagement. The peer group was disclosed, but the process for selecting the peer group was discussed in very conceptual terms. It is not clear if the peer group was set objectively or if the peer group skewed the analysis of compensation. Both shareholder engagement and peer group benchmarking are important components of corporate governance. This company’s incomplete approach justifies a vote against the proposal. 
  2. For board proposals. A strong relationship with shareholders is part of good governance. Supermajority voting requirements are usually an impediment to shareholder relationships. Occasionally, such requirements are helpful in fending off hostile takeover attempts or can be a useful tactic in optimizing valuations when selling the company. Since it seeks to remove the requirement, the board does not think the benefits associated with the potential occasional need are worth the costs in lowerquality governance. It is easy for Magni to support these proposals.