HEARD ON THE
| MARCH 10, 2009, 7:46 P.M. ET
RiskMetrics' Words Gain
Public fury over executive compensation could
be good news for shareholders of one company: proxy adviser RiskMetrics
RiskMetrics is the primary firm institutional
investors turn to for advice on how to vote their shares at annual meetings.
That job just got a lot bigger, with a raft of shareholder proposals to
limit pay and the new federal law requiring 400 companies receiving bailout
money to give shareholders an advisory vote on executives' compensation.
Congress is likely to extend the requirement
to all public companies. Few investors have much experience analyzing pay,
so they are more likely to seek help from RiskMetrics.
Another RiskMetrics unit gets paid on the
other side -- advising companies on how to improve governance and to sway
shareholders. Companies need shareholder approval to tinker with
now-valueless stock-option plans or re-elect directors.
That also is proving lucrative, although it
comes with risks. The model faces criticism because of potential conflicts
of interest when advising both individual companies and their shareholders.
For now, though, RiskMetrics is arguably the
most powerful player in proxy voting, as Internet firm Keynote Systems
learned last month. Keynote asked shareholders to approve a two-year
extension of its equity-compensation plan; RiskMetrics urged shareholders to
vote "no." In response, Keynote's chief executive adjourned the meeting for
a week and agreed to cancel 400,000 of his stock options.
Even after falling almost 40% in a year,
RiskMetrics shares trade at a lofty 26 times 2009 expected earnings. Heading
into a lucrative annual-meetings season, it has a lot to live up to.
Write to Phred Dvorak at
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