UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
Washington, D.C. 20549
SCHEDULE 14A
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Notice of 2018 2022
Annual Meeting of Shareholders and Proxy Statement
Our We strive to bring greater | Bringing clarity to Developnew research and models to help our clients better assess an increasingly complex and expanding global investment landscape Measureand model environmental, social and governance (ESG) and climate risk and opportunities Enhanceour clients’ experience by leveraging technology to easily integrate into client workflows and deliver our solutions across multiple platforms Achieveclient-centricity by understanding our clients’ unique needs in the markets in which they operate and by providing excellent client support Helping the |
2022 PROXY STATEMENT | 3 |
Letter from our Chairman and CEO
Looking ahead, we remain focused on being nimble and investing aggressively to meet client demand across the growth opportunities in front of us, including with respect to ESG and climate. 1 Recurring net new sales represent the amount of new recurring subscription sales net of subscription cancellations during the period. | Dear fellow shareholders, | ||
First and foremost, thank you for your continued support of MSCI Inc. (“MSCI” or the “Company”). Thanks to MSCI’s more than 4,000 employees around the world, we delivered exceptional results in 2021, demonstrating the strength of our ambitious strategy, key long-term investments and relentless execution. Delivering Results Our 2021 performance further speaks to the trust our clients place in us to help them navigate an increasingly complex investment landscape and our ability to continue to meet their needs. Among other milestones, at the end of 2021, we achieved record full-year and quarterly recurring sales and recurring net new sales1, along with the 32nd consecutive quarter of double-digit subscription growth in our Index product line. We also affirmed our status as a leading provider of ESG and climate solutions for investors. We saw significant momentum in our ESG and Climate segment, resulting in nearly 50% top-line growth compared to the prior year. Throughout 2021, we rolled out several new climate tools, including an analytical tool that provides carbon emissions data for more than 15,000 private companies and nearly 4,000 active private equity and debt funds. This is in addition to our launch of Climate Lab Enterprise, a first-in-kind visualization dashboard that combines our climate data with our analytical risk and portfolio management capabilities, and the carbon emission data we already provide on nearly 10,000 public companies. In 2021, we also saw a significant expansion of our capabilities with respect to private assets, with the completion of our acquisition of Real Capital Analytics, Inc. (“Real Capital Analytics” or “RCA”), a provider of data and analytics for the properties and transactions that drive the global commercial real estate capital markets. After this and other investments in our business, we returned approximately $440 million of cash to shareholders through a combination of dividends and share repurchases. Positioning MSCI for the Future Looking ahead, we remain focused on being nimble and investing aggressively to meet client demand across the growth opportunities in front of us, including with respect to ESG and climate. The global race | to net-zero keeps accelerating, and we aim to further position MSCI to become the top provider of ESG and climate solutions to the investment industry. We will also continue to invest in our data-transformation strategy. This strategy was a direct result of the feedback we received from many of you. We plan to continue to rapidly incorporate new proprietary and third-party data sets to expand and enrich our existing content in order to generate more meaningful and richer insights for our clients. We are also continuing to create new pathways for clients to access and interact with our products, including by developing and launching our new open-architecture Investment Solutions as a Service (“ISaaS”) offerings, many of which can integrate with our clients’ existing ecosystems via APIs. Doing our Part For the last several years, including by publishing the MSCI Principles of Sustainable Investing, we have been urging all investors to integrate ESG and climate considerations into their investment processes in order to achieve long-term, sustainable investment performance. Since then, we have published reports, data and research to continue to provide clarity for investors so that they can make more informed decisions regarding material environmental, social and governance risks. We have also released tools that can help our clients navigate these efforts – tools that support our mission of enabling investors to build better portfolios for a better world. In 2022, we not only remain deeply committed to this objective, but we also aim to lead by example through our corporate responsibility policies and practices. We Ask for Your Support Your vote is very important to us. We strongly encourage you to read both our Proxy Statement and 2021 Annual Report on Form 10-K in their entirety and ask that you support our recommendations. We sincerely appreciate your continued support of MSCI, and we look forward to the 2022 Annual Meeting. Sincerely, HENRY A. FERNANDEZ Chairman, Chief Executive Officer and Shareholder |
4 | MSCI |
Letter from our Independent
Lead Director
![]() The Board’s role is critical in overseeing MSCI’s strategy, and we continue to work closely with management on matters regarding the business, its performance and its long-term outlook. | Dear fellow shareholders, | ||
The independent directors of MSCI and I join Henry in inviting you to attend our Company’s 2022 Annual Meeting. It is a privilege to continue serving as your independent Lead Director during this important time for MSCI. As we approach the 2022 Annual Meeting, I am grateful for this opportunity to share with you some of the ways that the Board has worked together over the past year to provide independent oversight of areas that are important to you. Shareholder Engagement As a Board, we actively engage with our shareholders and gain firsthand information on the areas that matter most to them, including not just strategy and financial performance, but other key issues such as corporate responsibility, our efforts around diversity, equity and inclusion (“DE&I”), executive compensation and corporate governance. In the winter of 2021, during our Corporate Responsibility Roadshow, members of MSCI’s senior management engaged with top shareholders representing more than 40% of our shares outstanding. Members of the Governance and Corporate Responsibility Committee of the Board, Jacques Perold and Paula Volent, participated in discussions with several shareholders during these meetings. As detailed in this Proxy Statement, under “Shareholder Engagement,” we covered a range of topics, and the Board continues to use your input to inform our practices to ensure they align with shareholder interests. We welcome your continued engagement and feedback. Board Composition and Process An essential component of the Board leadership structure at MSCI is oversight by independent directors. As MSCI’s Lead Director, I am responsible for helping ensure that the Board exercises its role independent from the management | of the Company, as described in this Proxy Statement, under “Structure of our Board,” to ensure independent and effective oversight. One of my priorities as Lead Director is to ensure the Board is comprised of directors who are equipped to oversee the risks and opportunities of this business. This year’s Board nominees represent a wide range of backgrounds and expertise. We believe our diversity of experiences, perspectives and skills contribute to the Board’s effectiveness in managing risk and providing guidance to position MSCI for long-term success across rapidly changing business environments for us and for our clients. Of the 10 Board nominees, 9 are independent, which includes all committee chairs and members. We are pleased to announce the nomination of Rajat Taneja for election to the Board at our 2022 Annual Meeting. Rajat is President of Technology for Visa Inc., and has 30 years of global technology, innovation, and research and development experience. He has been a tremendous addition to the Board as we seek to increasingly leverage cutting-edge technologies to deliver enhanced user experiences and evolve MSCI’s cybersecurity program. Rajat’s appointment in 2021 was informed by the Board’s continued focus on its composition, as well as insights provided through the Board’s annual evaluation process, which includes both evaluation of the Board and its Committees as well as individual director evaluation through interviews that I conduct with each director. We also consistently prioritize a focus on the Board’s processes and structures to ensure they remain effective. In 2021, we instituted a review of the roles and responsibilities of our committees. We enhanced our committee charters to reflect leading practices and renamed |
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the Audit and Risk Committee; Compensation, Talent and Culture Committee; and Governance and Corporate Responsibility Committee to provide more clarity and transparency to stakeholders on areas of Board committee-level oversight. These changes in committee names and scope reflect the strategic significance that risk oversight, talent and culture management and corporate responsibility have to our long-term success, and they reflect the growing focus of these areas by our shareholders and the broader stakeholder community. Commitment to Corporate Responsibility The Board and its Governance and Corporate Responsibility Committee are actively engaged in overseeing MSCI’s corporate responsibility efforts, including to ensure that our practices complement our leadership in ESG and climate. Based on feedback from you, in 2021, we announced our net-zero commitment and increased the amount of reporting we prepare relating to our corporate responsibility efforts, including our first United Nations Sustainable Development Goals (SDG) report and our first Sustainable Finance Disclosure Regulations (SFDR) report. In addition, we published our two most recent EEO-1 reports (containing demographic data for our U.S. employees by race/ethnicity, gender and job categories) as well as SASB-aligned diversity disclosure, and we have committed to doing so in the future. As you will see in this Proxy Statement, we have added a more detailed “Corporate Responsibility” section to provide transparency on the governance of our corporate responsibility efforts by the Board and management. Our People and the Future of Work We are committed to ensuring that MSCI’s programs related to our employees continue to support our people and our strategy during a period of rapid change. The Board fully appreciates that MSCI’s employees are an essential element of our long-term success, and we spent significant time in 2021 reviewing the Company’s approach to organizational development, talent development, DE&I initiatives and succession planning. In particular, we focused on flexibility in how and where our employees work, and in January 2022, we implemented our “Future of Work,” a hybrid work environment that utilizes pandemic lessons to allow our employees to work at times at the office and other times remotely, depending on the requirements of specific roles. Following an extensive organizational design assessment, we also announced several changes to senior management, as well as the expansion of | MSCI’s Executive Committee to include greater representation from key operating functions, in particular, Research, Technology and Data, and Private Assets. In 2021, we also spent significant time reviewing the Company’s executive compensation program to ensure that MSCI is appropriately incentivizing long-term performance and shareholder value creation. Over the past several years, MSCI has chosen to incorporate a number of performance-based metrics and qualitative goals to reward exceptional performance, including by assessing performance against individualized DE&I goals, which are directly linked to a portion of each Managing Director’s annual incentive compensation. As we continue to promote an “owner-operator” mindset within the Company, we also significantly enhanced the stock ownership requirements applicable to our senior leaders. You can learn more about our executive compensation program in this Proxy Statement, under “Compensation Matters.” Oversight of Strategy and Risk The Board’s role is critical in overseeing MSCI’s strategy, and we continue to work closely with management on matters regarding the business, its performance and its long-term outlook. The Board sees an incredible opportunity for MSCI to continue to be a leader in the evolving global investment landscape, and, in 2021, our Board meetings regularly included consideration of significant business and organizational initiatives, capital allocation strategies and corporate development opportunities, including our acquisition of Real Capital Analytics in September. Throughout the year, the Board was also kept informed of enterprise risk and information technology risk developments, including our technology infrastructure, regulatory and compliance matters, public policy developments, risks and opportunities related to climate and go-to-market strategy. On behalf of my fellow independent directors and the entire Board, thank you for your continued support. We appreciate the opportunity to serve MSCI on your behalf in 2022 and beyond. We look forward to hearing your views at the 2022 Annual Meeting and through our on-going engagement. Sincerely, ROBERT G. ASHE Independent Lead Director and Shareholder |
6 | MSCI |
Notice of Annual Meeting
of Shareholders
Annual Meeting Proposals and Voting Recommendations
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2 | Advisory Vote to Approve Executive Compensation (Say-on-Pay) | “FOR”![]() | ||||||||
| Ratification of the
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Fellow Shareholder:
I cordially invite you to attend MSCI Inc.’s 2018The virtual annual meeting of shareholders (the “2018 Annual Meeting”) to be held via the internet through a virtual web conference atwww.virtualshareholdermeeting.com/MSCI2018 on May 10, 2018will commence at 2:30 P.M., Eastern Time, and any adjournments or postponements thereof,Time. Online check-in will be available beginning at 1:30 P.M., Eastern Time. Please allow ample time for the following purposes:online check-in process.
Our Board of Directors recommends thatTo participate in the virtual annual meeting, you vote “FOR”will need the election of the directors, the approval,16-digit control number included on an advisory basis, of our executive compensation and the ratification of the appointment of our independent auditor.
We are once again pleased to take advantage of the Securities and Exchange Commission (“SEC”) rules that allow us to furnish our proxy materials over the internet. As a result, we are mailing to many of our shareholders theyour Notice of Internet Availability of Proxy Materials, instead of a paper copy of ouron your proxy materials, including thiscard or on any additional voting instructions that accompanied your proxy statement (the “Proxy Statement”) and our annual report on Form10-K for the year ended December 31, 2017 (the “2017 Annual Report onForm 10-K”). The Notice of Internet Availability of Proxy Materials contains instructions on how to access this Proxy Statement (including the proxy card) and our 2017 Annual Report on Form10-K over the internet, how to request a paper or email copy of these materials and how to vote by mail or via the internet. We believe that posting the proxy materials on the internet expedites shareholders’ receiptmaterials.
A webcast replay of the information that they need, while lowering our costs of printing and delivery and reducing the environmental impact of our2022 annual meeting of shareholders.shareholders (the “2022 Annual Meeting”) will also be made available on our Investor Relations website (https://ir.msci.com).
Our Board of Directors has fixed the close of business on March 14, 2018 as the record date for determining the shareholders entitled to notice of, andIf you are a beneficial shareholder, your broker will not be able to vote at, our 2018 Annual Meeting. The Notice of Internet Availability of Proxy Materials will be mailed to our shareholders of record beginning on or about March 23, 2018. These proxy materials are being made available beginning on or about March 23, 2018.
As a shareholder of MSCI Inc., your vote is important. Whether or not you plan to attend our 2018 Annual Meeting, it is important that you vote as soon as possible to ensure that your shares are represented. For information on howwith respect to vote by mail, telephone, or viaany of the internet, please refer tomatters presented at the question “How do I vote my shares?” in Annex A,meeting, other than the Proxy Statement Summary,ratification of the proxy card, or the Noticeselection of Internet Availability of Proxy Materials distributed toour independent registered public accounting firm, unless you on or about March 23, 2018.give your broker specific voting instructions.
Thank you for your support of MSCI Inc.
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Important Notice Regarding the Availability of Proxy Materials for the
December 31, is not incorporated by reference into this Proxy Statement or any other report we file with the SEC. |
![]() | DATE AND TIME APRIL 26, 2022 (Tuesday) 2:30 P.M., EASTERN TIME |
![]() | LOCATION Attend the virtual meeting, including to vote and/or submit questions via the internet through a virtual web conference at: www.virtualshareholder |
![]() | RECORD DATE MARCH 1, 2022 |
MSCI INC.2018 PROXY STATEMENT iHow to Vote
Whether or not you plan to attend our 2022 Annual Meeting, it is important that you vote as soon as possible to ensure that your shares are represented.
![]() | INTERNET www.proxyvote.com Use the internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 25, 2022. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. |
![]() | TELEPHONE 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 25, 2022. Have your proxy card in hand when you call and then follow the instructions. |
![]() | Mark, sign and date your proxy card and return it in the postage- paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
2022 PROXY STATEMENT | 7 |
NOTE ON FORWARD-LOOKING STATEMENTS This Proxy Statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect our actual results, levels of activity, performance or achievements. Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in the 2021 Annual Report on Form 10-K filed with the SEC on February 11, 2022 and in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this Proxy Statement reflects MSCI’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI’s operations, results of operations, growth strategy and liquidity. MSCI assumes no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by law. Information and reports on our website or other websites that we refer to in this Proxy Statement will not be deemed a part of, or otherwise incorporated by reference in, this Proxy Statement or any other report we file with the SEC. |
8 | MSCI |
This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
Annual Meeting Information
MSCI Inc. trades under the
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As of December 31, 2021, 4,303people and served over 6,300clients in more than 95 countries. We are a leading provider of critical decision support tools and solutions for the | |||||
Mission To enable investors to build better portfolios for a better world. Strategic Pillars of Growth Extend leadership in research-enhanced content across asset Lead the Enhance distribution and content-enabling technology Expand solutions that empower client customization Strengthen client relationships and grow into strategic partnerships with clients Execute strategic relationships and acquisitions with complementary content and technology companies Addressing All Participants in the |
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During the virtual meeting, you will be able to vote electronically and submit questions atwww.virtualshareholdermeeting.com/MSCI2018. A webcast replay of the 2018 Annual Meeting will also be archived on our Investor Relations website, http://ir.msci.com/events.cfm, until May 10, 2019.
Annual Meeting Agenda and Voting Recommendations
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MSCI INC.2018 PROXY STATEMENT 1
PROXY STATEMENT SUMMARY
About MSCI Inc.
MSCI Inc. (referred to herein as the “Company, “MSCI,” “we,” “our,” “us”) is a leading provider of indexes and portfolio construction and risk management tools and services for global investors. On November 15, 2017, we celebrated the 10-year anniversary of our initial public offering (“IPO”). On March 14, 2018, our shares closed at $154.43, reflecting a 758% increase from our $18 share price at our IPO. Although we were legally incorporated in Delaware in 1998, we trace our beginnings to the licensing by one of our founding partners, Capital Group International, of our first global equity indexes in 1969. As of March 14, 2018, we had a market capitalization of approximately $14 billion. Our growth is attributable to our ongoing innovation and diverse portfolio of mission-critical investment decision support tools, which comprises the “One MSCI” framework and includes the following: indexes; portfolio construction and risk management products and services; Environmental, Social and Governance (“ESG”) research and ratings; and real estate research, reporting and benchmarking offerings. MSCI’s research-derived intellectual property includes methodologies, models, derived data and algorithms (collectively, “content”), as well as applications and services, which help our clients manage their investment processes and address their investment, risk and regulatory challenges. We also offer services that help clients use our content and applications more effectively and operate more efficiently.
We operate as a client-centric company, and our clients use our offerings for their most important investment activities across multiple asset classes, including benchmarking, index-linked product creation, portfolio construction, performance measurement and attribution, risk management, as well as investor and regulatory reporting. In addition, our clients are increasingly integrating the new content developed across our company, such as factor and ESG data and indexes, into their investment processes.
Our composition of revenue in 2017 and Run Rate(1) as of December 31, 2017 is as follows:
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Our Strategy
We aim to expand our position as a leading source for mission critical content, applications and services that support the investment processes of the largest and most sophisticated participants in the global investment industry. We have a comprehensive three-year strategic plan that is updated annually and is designed to further promote long-term shareholder value by: (1) creating broad, research-driven content, (2) expanding the client base and deepening existing client relationships, (3) developing flexible and scalable technology, (4) expanding value-added service offerings and (5) entering into strategic relationships and acquisitions.
In executing our strategy, we are committed to maintaining overall cost discipline and continuing to deliver positive operating leverage. Through disciplined expense management we can self-fund initiatives that deliver the highest return on investment. During 2017, our capital deployment strategy remained unchanged as we continued to prioritize returning capital to shareholders.
2 MSCI INC.2018 PROXY STATEMENT
PROXY STATEMENT SUMMARY
Strong Financial Performance
During 2017, our strong financial performance brought significant value to our shareholders in the form of substantial price appreciation and enabled us to continue investing in the long-term growth of the Company, as well as deliver on our commitment to returning capital to our shareholders in the form of share repurchases and dividends.
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The following graph compares the cumulative total shareholders’ return (“TSR”) of our common stock, the Standard & Poor’s 500 Stock Index and the NYSE Composite Index since December 31, 2008 (a little over one year after our IPO) assuming an investment of $100 at the closing price of each respective investment on December 31, 2008. In calculating annual TSR, we have assumed the reinvestment of dividends, if any. The indexes are included for comparative purposes only. They do not necessarily reflect management’s opinion that such indexes are an appropriate measure of the relative performance of the common stock.
The above graph is not “soliciting material,” is not to be deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
MSCI INC.2018 PROXY STATEMENT 3
PROXY STATEMENT SUMMARY
In 2017,2021, we continued to execute a focused strategy to accelerate growth, improve efficiency and attract the best talent. Our strong results reflect our commitment to building long-term shareholder value. Financial highlights for the year ended December 31, 20172021 include the following:
20172021 Financial Highlights(1)
(in millions except percentages) | OPERATING EXPENSES (in millions except percentages) | |
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DILUTED EPS / ADJUSTED EPS* (unaudited) | CASH FROM OPERATING ACTIVITIES (in millions except percentages) | |
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* | MSCI has presented supplemental non-GAAP financial measures as part of this Proxy Statement. Definitions of each non-GAAP measure and a reconciliation of each non-GAAP financial measure with the most comparable GAAP measure are set forth inAnnex |
10 | MSCI | PROXY SUMMARY |
Aligning Executive Compensation with Company Strategy and Performance
We believe our executive compensation program was integral to our successful financial performance in 2017. To align the interests and compensation of our named executive officers (“NEOs”) with the long-term interests of our shareholders and to further drive the performance culture that is a key to successfully delivering on our corporate strategy, MSCI’s executive compensation program emphasizes performance-based compensation in the form of equity grants under our Long-Term Incentive Plan (“LTIP”) and the payment of cash incentives under our Annual Incentive Plan (“AIP”). In February 2016, in conjunction with the implementation of our three-year strategic growth plan focused on One MSCI, client-centricity, capital optimization and operating efficiencies, we reformulated our executive compensation program to be one that is more closely aligned with shareholder interests and focused on the achievement of both short- and long-term financial and strategic targets, including an LTIP that incentivizes our executives to focus on the long-term execution of our strategic priorities to create shareholder value.
LTIP. In 2016, we granted multi-year performance stock units (“PSUs”) to each of our NEOs that cover a three-year performance cycle (“Multi-Year PSUs”) consisting of fiscal years 2016, 2017 and 2018. Because the Multi-Year PSUs operate on an end-to-end basis without overlapping cycles or additional grants of PSUs during the performance cycle, no additional PSUs were awarded to our NEOs in 2017, and none will be awarded in 2018. The Multi-Year PSUs will vest between 0% and 300% based on the achievement of a challenging multi-year absolute total shareholder return compound annual growth rate (“TSR
4 MSCI INC.2018 PROXY STATEMENT
PROXY STATEMENT SUMMARY
CAGR”) performance metric (or a multi-year relative TSR CAGR (“Relative TSR CAGR”) performance metric applicable in certain circumstances as further described on page 53 of this Proxy Statement).
Our NEOs, other than our CEO, continue to receive annual grants of restricted stock units (“RSUs”). Mr. Fernandez’s LTIP award is granted entirely in the form of PSUs and, as such, he did not receive any additional equity awards in 2016 and 2017, and he will not be granted any equity awards in 2018. The awards granted under the LTIP in 2017 for each of our NEOs are further detailed in the Summary Compensation Table for 2017 on page 58. See the table on page 40 of this Proxy Statement, which reflects the annualized portion of the target value of the Multi-Year PSUs attributable to 2017 (i.e., one-third of the total target value of the Multi-Year PSUs).
AIP. The AIP closely aligns the interests of our NEOs with those of shareholders by using a formulaic approach based on specific annual financial criteria and individual key performance indicators (“KPIs”) when determining annual cash incentives. The Compensation & Talent Management Committee (the “Compensation Committee”) regularly assesses the metrics and weighting of those metrics, in addition to shareholder feedback, to ensure that the AIP reflects the appropriate metrics and proper balance of those metrics necessary to deliver the annual growth that will serve as the foundation for longer-term value creation. In 2018, in response to shareholder feedback, the Compensation Committee expanded the inclusion of Adjusted EPS to the product-level grids, rather than only including it in the corporate-level grid, because Adjusted EPS is a primary measure used by many of our shareholders in assessing our ongoing performance.Capital Allocation Program
Since our 2017 Say-on-Pay vote, the Compensation Committee’s actions with respect to our CEO’s compensation were solely to (i) increase his annual base salary (effective January 1, 2018) from $950,000 to $1,000,000 to align with competitive market practice (the first increase in Mr. Fernandez’s base salary since 2014), (ii) pay Mr. Fernandez an annual cash bonus in respect of 2017 of approximately $1.5 million under our AIP, based on actual performance against the applicable financial metrics and his KPIs and (iii) increase his fiscal 2018 target cash incentive to $1.4 million to be paid under the AIP to reflect competitive market practice. As reflected in the table on page 41 of this Proxy Statement, on an annualized basis, Mr. Fernandez’s 2017 compensation (which is the subject of this year’s Say-on-Pay vote) increased by only 1.4% relative to 2016.
Actual cash incentives paid to our NEOs for 2017 were higher than their target values based on actual performance against the applicable financial metrics and their KPIs due to our strong financial performance and the performance of our NEOs in 2017. See the table on page 52 of this Proxy Statement for the actual amounts paid.
Shareholder Engagement. Before, during and following the 2017 proxy season, we engaged with the governance and/or proxy voting groups of 19 of our institutional shareholders, representing a majority of our outstanding common shares, to discuss corporate governance and executive compensation related matters. Members of our investor relations, executive compensation and corporate governance groups participated in these meetings, and for certain meetings, one of our independent directors was present to answer questions, including our Compensation Committee Chair or our Lead Director. Most of the shareholders with whom we engaged were generally supportive of our current LTIP and its alignment of pay with performance, although certain shareholders had different views as to their preferred performance metrics and the appropriate performance period. Some of the topics which we discussed and received feedback from our shareholders on included certain features of our LTIP (including the Multi-Year PSUs), including:
The feedback we received from shareholders was reported to the Compensation Committee and the full Board. Because we granted the Multi-Year PSUs in 2016, we have and will continue to honor our commitment to our shareholders not to grant our NEOs any PSUs in 2017 or 2018. However, we will not be in a position to incorporate feedback we received from our shareholders until we design our 2019 LTIP awards, at which time we will take into account the feedback from our shareholders as we consider that design.
MSCI INC.2018 PROXY STATEMENT 5
PROXY STATEMENT SUMMARY
The Company will continue to maintain an active dialogue with shareholders and evaluate feedback on issues of importance to them, including the metrics that drive each of our NEO’s long-term incentive compensation. Our engagement with shareholders on executive compensation is further described on page 44 of this Proxy Statement.
Primary Components of 2017 Target Compensation
As reflected in the below pay mix charts, our executive compensation program is designed to pay base salaries to our NEOs that represent a relatively small percentage of their total compensation, while offering them the opportunity to earn a significant portion of their compensation in the form of variable compensation (i.e., annual cash bonuses and long-term incentive awards).
~$3.1 billion Capital returned in the five years (as of December 31, 2021) (includes dividends) | ~11.3 million Shares repurchased in the last five years (as of December 31, 2021) | ~33.3 percent 2021 increase in quarterly per-share dividend from $0.78 quarterly to |
For additional detail on our executive compensation program, see our Compensation Discussion and Analysis beginning on page 37.
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$1.04 quarterly
PROXY STATEMENT SUMMARY
Environmental, Social and Governance Highlights
ESG considerations are becoming increasingly important to our shareholders and clients, as demonstrated by the growth in MSCI ESG Research and Ratings and MSCI ESG indexes. We also view strong ESG practices as core to our own success. What follows are some brief highlights of how we approach these issues at MSCI.
ANNUALIZED DIVIDEND RATES
(1) | MSCI began paying quarterly dividends in September 2014 at an annualized rate of $0.72 per share. |
Capital Optimization Activities in 2021
Increased regular quarterly cash dividend by approximately 33.3% to $1.04 per share, representing $4.16 per share on an annualized basis. | |
● | Repurchased over 300,000 shares of our common stock at an average price of $412.25 per share for a total value of $140 million. |
● | Issued $500 million of 3.625% senior unsecured notes due 2030; leveraged lower coupon rate for pre-maturity redemption of $500 million of 4.750% senior unsecured notes due 2026. |
● | Issued $600 million of 3.625% senior unsecured notes due 2031. |
● | Issued $700 million of 3.250% senior unsecured notes due 2033; leveraged lower coupon rate for pre-maturity redemption of $500 million of 5.375% senior unsecured notes due 2027. |
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Total Shareholder Return
The following graph compares the cumulative total shareholders’ return (“TSR”) of our common stock, the Standard & Poor’s 500 Stock Index and the NYSE Composite Index since December 31, 2011 assuming an investment of $100 at the closing price of each respective investment on December 31, 2011. In calculating annual TSR, we have assumed the reinvestment of dividends, if any. The indexes are included for comparative purposes only. They do not necessarily reflect management’s opinion that such indexes are an appropriate measure of the relative performance of our common stock.
COMPARISON OF CUMULATIVE TEN YEAR TOTAL RETURN
The above graph is not “soliciting material,” is not to be deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Company Name/Index | 12/31/11 | 12/31/12 | 12/31/13 | 12/31/14 | 12/31/15 | 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | 12/31/21 | ||||||||||||||
MSCI Inc. | $100.00 | $ | 94.11 | $132.77 | $144.65 | $222.77 | $246.44 | $400.77 | $472.71 | $837.61 | $ | 1,460.66 | $ | 2,017.74 | |||||||||||
S&P 500 Index | $100.00 | $ | 116.00 | $153.57 | $174.60 | $177.01 | $198.18 | $241.45 | $230.86 | $303.56 | $ | 359.41 | $ | 462.57 | |||||||||||
NYSE Composite Index | $100.00 | $ | 116.03 | $146.52 | $156.41 | $150.02 | $167.92 | $199.37 | $181.53 | $227.84 | $ | 243.76 | $ | 294.16 |
Source: S&P Global
12 | MSCI | PROXY SUMMARY |
Corporate Responsibility
We believe, and our research shows, that sound ESG and climate practices are commonly linked to better business results. We provide the global financial community with innovative products and services that enable investors to make better investment decisions for a better world. As a leader in providing ESG and climate solutions to investors, we also aim to demonstrate leading corporate responsibility practices.
Our commitment to corporate responsibility is embodied in the following four pillars:
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● ESG and Climate Research ● Published “The Role of Capital in the Net-Zero Revolution” to identify specific steps to drive to a net-zero economy by 2050 ● Published the “Women on Boards Progress Report,” our annual survey on the state of women’s representation on corporate boards ● Published “Breaking Down Corporate Net-Zero Climate Targets” to provide a framework to assess companies’ decarbonization targets ● Data and Metrics Published ● Launched our Implied Temperature Rise search tool, which discloses how individual companies align with different climate pathways and decarbonization targets ● Launched the MSCI Net-Zero Tracker to gauge progress by the world’s public companies toward curbing climate risk ● Released the U.S. Racial and Ethnic Data Set to provide information on select U.S. companies’ disclosure practices and policies with regards to racial and ethnic diversity | ● Product Launches and Initiatives ● Launched our MSCI Climate Lab Enterprise product to help investors monitor and manage climate risk across the investment process ● Expanded our toolkit of climate data and reporting capabilities to help investors meet the requirements of the E.U. Sustainable Finance Disclosure Regulation (“SFDR”) ● Together with The Burgiss Group, LLC (“Burgiss”), launched the Carbon Footprinting of Private Equity and Debt Funds product to measure the carbon intensity of private assets ● ESG and Climate Index Launches ● Introduced MSCI Climate Paris Aligned Indexes, designed to support investors seeking to reduce their exposure to transition and physical climate risks ● Launched a new suite of Circular Economy Indexes that aim to represent the performance of companies that facilitate a transition to a circular economy, addressing global resource challenges such as energy scarcity, biodiversity loss, waste and pollution |
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MSCI INC.2018 PROXY STATEMENT 7
PROXY STATEMENT SUMMARY
ESG Highlights (Continued)
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● Diversity Equity & Inclusion (DE&I) ● Hired our first Chief Diversity Officer, responsible for operating across MSCI to align our DE&I goals with business outcomes, help embed DE&I considerations in the way we do business, attract and retain the best diverse talent and increase the impact of our internal workplace initiatives ● Published our 2020 and 2019 U.S. Consolidated EEO- 1 Report data, in addition to disclosing diversity data aligned to Sustainability Accounting Standards Board (“SASB”) categories ● Formed three new DE&I employee resource groups (“ERGs”), the Asian Support Network, All Abilities Network and Hola! MSCI ● Executed 4th Annual | ● Compensation ● All Managing Directors created, and were held accountable for, individual DE&I Goals directly linked to their 2021 compensation ● Enhanced Executive Committee Share Ownership Guidelines to be one of ● Employee Engagement: In our most recent employee engagement survey (not including employees from newly acquired companies), the percentage of respondents characterized as “fully engaged” equaled the highest since implementing the survey ● Future of Work: Launched our Future of Work initiative that introduces increased flexibility of when and where employees work, reimagines the use of our offices and ramps up the use of technology to enhance our interactions with
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8 MSCI INC.2018 PROXY STATEMENT
![]() Sustainable Operations Manage carbon emissions and climate risks, and implement sustainable operational practices | ||||
RECENT HIGHLIGHTS ● New Commitments ● Committed to a goal of net-zero carbon emissions before 2040 throughout our operations, prioritizing reducing our most material and controllable emissions and engaging with our suppliers ● Committed to support all of the United Nations (“UN”) Sustainability Development Goals (“SDGs”) and aim to measure impact for SDGs relating to gender equality, decent work and economic growth, reduced inequality and climate action ● External Recognition: Improved our CDP score to reach leadership score of A- ● Expanding Alliances ● Became a founding member of the Net Zero Financial Service Providers Alliance, committing to align our relevant services and products with a 2050 net-zero emissions target ● Participated in, and met with policymakers and financial regulators at, the UN Climate Change Conference (COP26) | ● Engaging with our Suppliers ● Updated Supplier Code of Conduct to address emissions in the MSCI supply chain. Prioritized engagement with major suppliers to align net-zero goals ● Developed an internal Sustainable Supplier Management Team to support efforts to learn about our suppliers’ corporate responsibility practices and seek alignment with our own commitments ● New Reporting ● Published first SFDR report ● Published first UN SDGs report ● Updating our Policies ● Updated our Environmental Policy to include our commitment to net-zero and to environmental issues (e.g., biodiversity, waste and water) ● Updated our Travel Policy to encourage employees to prioritize virtual meetings and use of low carbon travel options | |||
![]() Robust Governance Implement policies and practices that reflect MSCI’s commitment to strong governance practices | ||||
RECENT HIGHLIGHTS ● Board Developments ● Appointed Rajat Taneja, a new director with a deep background in technology ● Enhanced Board Committee Charters to reflect leading practices and renamed the Audit and Risk Committee, Compensation, Talent and Culture Committee and Governance and Corporate Responsibility Committee to provide more clarity and transparency on Board committee-level oversight ● Conducted board education sessions to strengthen the Board’s expertise on climate, including sessions on climate science, climate investing, climate reporting solutions and net-zero commitments | ● Corporate Responsibility Governance ● Formed a Corporate Responsibility Policy Committee (“CRPC”), responsible for reviewing strategic corporate responsibility initiatives ● Expanded the Corporate Responsibility Committee (“CRC”) to include new members from DE&I, Technology, Data Management, Client Coverage, Controllership and Financial Planning & Analysis teams. ● Risk Oversight: Integrated climate and DE&I into our risk management program, with reporting to the Audit and Risk Committee | |||
For additional information about our Corporate Responsibility Program, please see page 45 of this Proxy Statement.
14 | MSCI | PROXY |
Governance Highlights
Our Board of Directors Nominees
Each of our current directors except Patrick Tierney who is retiring from our Board, effective May 1, 2018, and Rodolphe M. Vallee who is retiring from our Board, effective May 10, 2018, is standing for election to hold office until the next annual meeting of shareholders or until the director’s earlier resignation, death or removal. The table below provides information on each of our director nominees.nominees, including which of our four standing committees the director nominee sits on. Our four standing committees are the Audit and Risk Committee (the “Audit Committee”), the Compensation, Talent and Culture Committee (the “Compensation Committee”), the Governance and Corporate Responsibility Committee (the “Governance Committee”) and the Strategy and Finance Committee (the “Strategy Committee”).
Name | Age | Director Since | Principal Occupation | Independent | ||||
Henry A. Fernandez | 59 | 2007 | Chairman and CEO, MSCI Inc. | |||||
Robert G. Ashe | 59 | 2013 | Former General Manager, Business Analytics, IBM Corp. (Formerly CEO of Cognos Inc.) | ✔ | ||||
Benjamin F. duPont | 54 | 2008 | Co-Founder and Partner, Chartline Capital Partners | ✔ | ||||
Wayne Edmunds | 62 | 2015 | Interim Group CEO, BBA Aviation | ✔ | ||||
Alice W. Handy | 69 | 2009 | Managing Member, Investure | ✔ | ||||
Catherine R. Kinney | 66 | 2009 | Former President, New York Stock Exchange | ✔ | ||||
Wendy E. Lane | 66 | 2015 | Chairman, Lane Holdings, Inc. | ✔ | ||||
Jacques P. Perold | 59 | 2017 | Former President, Fidelity Management and Research Company | ✔ | ||||
Linda H. Riefler | 57 | 2007 | Former Chairman of Global Research and Chief Talent Officer, Morgan Stanley | ✔ | ||||
George W. Siguler | 70 | 2009 | Co-Founder, Siguler Guff & Company | ✔ | ||||
Marcus L. Smith | 51 | 2017 | Former Director of Equity (Canada) and Portfolio Manager, MFS Investment Management | ✔ |
Our 11 director nominees have had senior leadership experience at various domestic and multinational companies. In these positions, they obtained diverse skills that are valuable for the execution
2022 PROXY STATEMENT | 15 |
Director Core Competencies
Proposal 1
Election of Directors | The Board recommends a vote FOR each director nominee.
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16 | MSCI | PROXY SUMMARY |
Engaging with our Shareholders
We believe that engaging with our shareholders, prospective shareholders and sell-side analysts is the best way to address the issues that matter most to them. During 2021, we held over 300 meetings covering a wide range of matters. While we aim to engage with our shareholders year-round through investor meetings and industry conferences, our key shareholder engagement activities for 2021 included our Investor Day held in February 2021 and our Corporate Responsibility Roadshow conducted in the winter of 2021.
Shareholder Outreach Team | Senior Business Leaders | + | Finance and Investor Relations Team | + | Corporate Secretary Team | + | Human Resources Team, including Chief Diversity Officer | + | Corporate Responsibility Team and Global Corporate Services Team | + | Members (select meetings) | |||||||||||||||
What We Discussed | OUR BUSINESS Market Trends Competitive Environment Product Development Financial Performance Overall Outlook | OUR CORPORATE RESPONSIBILITY EFFORTS Corporate Responsibility Practices and Disclosures, including ESG & Climate Human Capital Management, Executive Compensation Program | OVER 300 meetings with our shareholders, prospective shareholders and sell-side analysts, including successful Investor Day and Corporate Responsibility Roadshow ~58% of our shares outstanding represented across our shareholder engagement meetings in 2021 |
See “Shareholder Engagement” on page 40 for more information on our year-round shareholder engagement activities.
2022 PROXY STATEMENT | 17 |
Proposal 2 Advisory Vote to Approve Executive Compensation (Say-on-Pay) | The Board recommends a vote FOR this proposal.
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Aligning Executive Compensation with Company Strategy, Culture and Performance
We believe our executive compensation program was integral to our successful financial performance in 2021. Our executive compensation program is designed not only to closely align the compensation and interests of our named executive officers (“NEOs”) with the long-term interests of our shareholders, but also to reflect the economic realities of our operating environment. MSCI’s executive compensation program emphasizes performance-based compensation in the form of cash incentive awards under our Annual Incentive Plan (“AIP”) and equity incentive awards under our Long-Term Incentive Plan (“LTIP”) that focus respectively on the achievement of short- and long-term financial and strategic targets.
SHORT-TERM (ANNUAL INCENTIVE PLAN CASH BONUS) | LONG-TERM (EQUITY GRANTS) | |||||||
![]() | ● Restricted Stock Units (for 2021, ratable vest, and for 2022, cliff-vest after a three-year service period) ● Performance Stock Units (earned based on absolute TSR CAGR) with a 1-year post vesting mandatory holding period for 3-Year PSUs ● Performance Stock Options (earned based on cumulative revenue and cumulative Adjusted EPS) (new for 2022) | |||||||
2021 ANNUALIZED CEO | 2021 AVERAGE ANNUALIZED OTHER NEOS |
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In 2021, our CEO received over 90% of his compensation in the form of “at-risk” variable compensation under the AIP and LTIP (on average, over 85% in the case of our other NEOs).
Annual Incentive Plan
The AIP closely aligns the interests of our NEOs with those of our shareholders by emphasizing a formulaic approach to determine annual cash incentive awards, which are based on the achievement of specified annual financial criteria aligned with our Board-approved Operating Plan (70% of the target annual cash bonus under the AIP), individual key performance indicators (“KPIs”) (20% of the target annual cash bonus under the AIP) and specific DE&I goals (“DE&I Goals”) (10% of the target annual cash bonus under the AIP) that serve to focus our senior management team on enhancing DE&I progress within the Company. The Compensation Committee regularly assesses the components and metrics used in the AIP and the weighting of those components and metrics, in addition to taking into account shareholder feedback.
For additional information about the 2021 AIP program, please see the discussion on page 71 of this Proxy Statement.
18 | MSCI | PROXY SUMMARY |
Long-Term Incentive Plan
The LTIP is designed to prioritize shareholder value creation and facilitate an “owner-operator” mindset among our senior executives.
In 2021, we granted our NEOs a mix of RSUs and PSUs (including separate awards of PSUs with a 3-year cumulative performance period (“3-Year PSUs”) and PSUs with a 5-year cumulative performance period (“5-Year PSUs”)), the mix of which varies based on the executive’s position. Consistent with our recent practice, each of our CEO and President & COO received 100% of his equity incentive compensation in 2021 in the form of PSUs. In addition, for 2021, the Compensation Committee increased the proportion of our President & COO’s 5-Year PSUs from 50% to 60% of his overall equity incentive compensation (with the remaining 40% granted in the form of 3-Year PSUs), commensurate with our CEO.
In 2022, the Compensation Committee enhanced our LTIP by introducing a new award vehicle into the program: financial-based performance stock options (“PSOs”) that cover a cumulative three-year performance period and replace the grant of 5-Year PSUs.
The 2022 LTIP comprises a mix of the following:
RSUs | Annual grant of RSUs to our NEOs (other than our CEO and President & COO) that cliff-vest at the end of a three-year service period. This reflects a change from ratable vesting over three years for RSUs granted prior to 2022. ●Our CEO and President & COO were not granted any RSUs in 2021 or 2022, and instead all of their LTIP awards for such years were granted in the form of PSUs and PSOs tied to performance metrics. | |
2022 PSUs | Annual grant of PSUs which cover a cumulative three-year performance period. The 3-Year PSUs are eligible to vest between 0% and 300% based on the achievement of an absolute total shareholder return compound annual growth rate (“TSR CAGR”) performance metric. The 3-Year PSUs include a one-year post-vest mandatory holding period. | |
2022 PSOs | Annual grant of PSOs which cover a cumulative three-year performance period. The PSOs are eligible to vest between 0% and 200% based on the combined level of achievement of (i) a cumulative revenue performance goal and (ii) a cumulative adjusted EPS performance goal (each weighted at 50%). |
For additional information about the LTIP, please see the discussion beginning on page 79 of this Proxy Statement.
Increased Stock Ownership and Retention Requirements
In 2022, in order to further enhance an “owner-operator” mindset among senior executives, our Compensation Committee amended our existing share ownership and retention guidelines to require that all members of our Executive Committee, including our NEOs, must hold shares equivalent, in the aggregate, to 25% of the “net shares” they receive (i.e., after payment of taxes, exercise price and related costs) from equity awards granted to them after January 1, 2022. The Compensation Committee also approved revisions to the minimum ownership guidelines to increase the thresholds applicable to members of our Executive Committee, including our NEOs, to among the highest in our peer group (including 12x base salary for our CEO and President & COO). For additional information about our Share Ownership and Retention Guidelines applicable to our NEOs, please see page 83 of this Proxy Statement.
2022 PROXY STATEMENT | 19 |
Executive Compensation Highlights
Over the past several years, we have continued to enhance our executive compensation program to align with shareholder interests more closely and to further incentivize our executives to focus on the long-term execution of our strategic priorities to create shareholder value. The table below highlights certain key elements of, and enhancements to, our executive compensation program over the past several years.
2020 | 2021 | 2022 |
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● No changes made to 2020 Operating Plan or annual cash incentive targets for 2020 under AIP in response to challenging operating environment ● 97.8% of the votes cast on the Say-on-Pay Advisory Vote at the 2020 annual meeting of shareholders were in support of the compensation of our NEOs ● No increase to CEO base salary or total target cash incentive award for 2020 ● CEO received all of his LTIP awards in the form of PSUs, and increased proportion of his 5-Year PSUs from 50% to 60% of total CEO equity compensation for 2020 ● President & COO began receiving all of his LTIP awards in the form of PSUs | ● CEO and President & COO received all of their LTIP awards in the form of PSUs ● Added a 1-year post-vest mandatory holding period to 3-Year PSU awards ● 96.8% of the votes cast on the Say-on-Pay Advisory Vote at the 2021 annual meeting of shareholders were in support of the compensation of our NEOs ● No increase to CEO and President & COO base salaries, total target cash incentive awards or target LTIP awards for 2021 ● President & COO increased proportion of 5-Year PSUs from 50% to 60% (commensurate with CEO) ● Linked 10% of the target AIP cash incentive for all Managing Directors globally to achievement of DE&I Goals | ● Introduced PSOs as new equity vehicle ● CEO and President & COO received all of their LTIP awards in the form of 3-Year PSUs and PSOs, tied to performance metrics ● Annual grant of RSUs for other NEOs will cliff-vest at the end of a three-year service period ● Retained 1-year post-vest mandatory holding period on 3-Year PSU awards ● Increased minimum share ownership requirements applicable to all members of our Executive Committee, including our CEO and President & COO to 12X base salary ● Added requirement that while members of the Executive Committee, such individuals including our NEOs, must hold shares equivalent, in the aggregate, to 25% of the “net shares” they receive from equity awards granted to them after January 1, 2022 ● No increase to CEO and President & COO base salaries or total target cash incentive awards for 2022 ● All Executive Committee members included a climate commitment goal in their 2022 individual KPIs under the AIP |
Response to Say-on-Pay Vote At our 2021 annual meeting of shareholders, stockholders again expressed overwhelming support for the compensation of our NEOs with approximately 96.8% of the votes cast approving our “Say on Pay” advisory proposal relating to our NEO compensation. This represents the fourth consecutive year of “Say on Pay” approval of 96% or higher. | ![]() |
To read more about what our shareholders think of our Executive Compensation program, see the discussion on page 67 of this Proxy Statement.
Proposal 3 Ratification of the Appointment of MSCI’s Independent Auditor | The Board recommends a vote FOR this proposal.
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The Audit and Risk Committee periodically reviews the engagement of the independent auditor to assess, among other things, the skills, experience, service levels and costs associated with conducting the annual audit of the Company’s financial statements. PwC has served as our independent auditor since March 2014.
20 | MSCI |
Proposal No. 1
Election of Directors
Our Board currently has 10 directors. Each director stands for election at each annual meeting of shareholders and holds office until his or her successor has been duly elected and qualified or the director’s earlier resignation, death or removal. All of the nominees presented beginning on page 14 of this Proxy Statement are directors of MSCI as of March 16, 2022. All directors, other than Rajat Taneja, were elected at the 2021 annual meeting of shareholders. The Board believes that each of the nominees brings strong skills and experience to the Board, giving the Board, as a group, the appropriate skills needed to exercise its oversight responsibilities and advise management with respect to the Company’s strategic initiatives. Each nominee has indicated that he or she is willing and able to serve if elected. We do not anticipate that any nominee will be unable or unwilling to stand for election, but if that happens, your proxy vote will be cast for another person nominated by the Board, or the Board may elect to reduce its size. VOTE REQUIRED AND RECOMMENDATION The affirmative vote of a majority of the votes cast with respect to each director’s election at our 2022 Annual Meeting is required to approve Proposal No. 1. Abstentions shall not be treated as votes cast. For additional information on the consequences for directors who do not receive a majority of the votes cast, please refer to “What happens if a director does not receive a majority of the votes required for his or her re-election?” in Annex A. | |||
![]() | Our Board recommends that you vote “FOR” the election of all ten nominees named below. Proxies solicited by our Board will be voted “FOR” these nominees unless otherwise instructed. | ||
ELECTIONOF DIRECTORS
Our Board currently has 13 directors. Each director stands for election at each annual meetingTable of shareholders and holds office until his or her successor has been duly elected and qualified or the director’s earlier resignation, death or removal. Each of Rodolphe M. Vallee and Patrick Tierney will not be standing forre-electionContents at the 2018 Annual Meeting and will be retiring from our Board, effective May 10, 2018 and May 1, 2018, respectively. Concurrent with their resignations, the size of the Board will be decreased to 11. All of the nominees presented below are directors of MSCI as of March 23, 2018. Other than Marcus L. Smith, who was appointed by the Board upon the recommendation of the Nominating Committee to serve as a director beginning on November 2, 2017, all directors were elected at the 2017 annual meeting of shareholders. The Board believes that each of the nominees brings strong skills and experience to the Board, giving the Board, as a group, the appropriate skills needed to exercise its oversight responsibilities and advise management with respect to the Company’s strategic initiatives.
Each nominee has indicated that he or she is willing and able to serve if elected. We do not anticipate that any nominee will be unable or unwilling to stand for election, but if that happens, your proxy will be voted for another person nominated by the Board or the Board may elect to reduce its size.
Our Board includes an appropriate mix of experience, tenure, diversity, leadership, skills and qualifications in areas of importance to the Company. Our directors have had senior leadership experience at various domestic and multinational companies. In these positions, they obtained diverse management skills, including strategic and financial planning, regulatory compliance, risk management and leadership development. Additional detail on each director nominee’s experiences and qualifications follows their biographies beginning on page 11 of this Proxy Statement. The Nominating Committee believes the director skills and experiences set forth on the “Director Core Competencies” table on page 9 of this Proxy Statement are those most relevant to the Board’s oversight responsibilities and the Company’s strategic direction and strives to ensure that the Board includes a balanced mix of qualifications.
Vote Required and Recommendation
The affirmative vote of a majority of the votes cast with respect to each director’s election at our 2018 Annual Meeting is required to approve Proposal No. 1. Abstentions shall not be treated as votes cast.
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF ALL ELEVEN NOMINEES NAMED BELOW.
PROXIES SOLICITED BY OUR BOARD WILL BE VOTED “FOR” THESE NOMINEES UNLESS OTHERWISE INSTRUCTED.
10 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
2022 PROXY STATEMENT | 21 |
22 | MSCI | PROPOSAL NO. 1: ELECTION OF DIRECTORS |
DIRECTOR CORE COMPETENCIES | Ashe | Edmunds | Fernandez | Kinney | Perold | Rattray | Riefler | Smith | Taneja | Volent | ||||||||||
Executive Leadership | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
Governance/Public Company Board | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
Industry Experience | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
Global Perspective/International Experience | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
Regulatory Compliance/Government | ● | ● | ● | ● | ● | |||||||||||||||
Investments/Strategy and Corporate Development | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||
Financial Expertise | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
Risk Management | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||
Client Relations/Sales/Marketing | ● | ● | ● | |||||||||||||||||
Innovation, Data and Technology | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||
Corporate, Environmental and Social Affairs | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||
Human Capital Management/Executive Compensation | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||
TENURE/AGE/GENDER | ||||||||||||||||||||
Tenure | 8 | 7 | 14 | 12 | 5 | 2 | 14 | 4 | <1 | 2 | ||||||||||
Age | 62 | 66 | 63 | 70 | 63 | 52 | 61 | 55 | 57 | 65 | ||||||||||
Gender | M | M | M | F | M | M | F | M | M | F | ||||||||||
RACE/ETHNICITY/BIRTHPLACE | ||||||||||||||||||||
African American/Black | ● | |||||||||||||||||||
Alaskan Native/Native American | ||||||||||||||||||||
Asian/South Asian | ● | |||||||||||||||||||
Caucasian/White | ● | ● | ● | ● | ● | ● | ● | |||||||||||||
Hispanic/Latino | ● | |||||||||||||||||||
Native Hawaiian or Pacific Islander | ||||||||||||||||||||
Two or More Races | ||||||||||||||||||||
LGBTQ+ | ||||||||||||||||||||
Born Outside of the U.S. | ● | ● | ● | ● | ● |
2022 PROXY STATEMENT | 23 |
Director since: Age: 62 years old Committees: Audit Committee (Member) |
Independent Lead Director
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| Mr. Ashe retired from IBM Corporation (“IBM”) in January 2012, where he had most recently served as General Manager of Business Analytics from 2010 to 2012 and before that as General Manager of Business Intelligence and Performance Management since 2008, following IBM’s acquisition of Cognos Inc. (“Cognos”), a Canadian provider of business intelligence and performance management CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
PRIOR OTHER PUBLIC COMPANY DIRECTORSHIPS: ServiceSource International, Inc. QUALIFICATIONS:
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24 | MSCI | PROPOSAL NO. 1: ELECTION OF DIRECTORS |
MSCI INC.2018 PROXY STATEMENT 11
CORPORATE GOVERNANCE
Director since: 2015 Age: 66 years old Committees: Audit Committee (Chair) | ||
Independent Director
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| Mr. Edmunds PRIOR OTHER PUBLIC COMPANY DIRECTORSHIPS:
QUALIFICATIONS: We believe that Mr. Edmunds’ extensive insight into global companies in the technology sector and
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12 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
Director since: 2007 Age: 63 years old | ||
HENRY A. FERNANDEZ
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CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
QUALIFICATIONS: We believe that Mr. Fernandez’s extensive experience |
2022 PROXY STATEMENT | 25 |
Director since: Age: 70 years old Committees: Governance Committee (Member) | CATHERINE R. Independent Director
| Ms. Kinney retired from NYSE Euronext in March 2009, having served as CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
PRIOR OTHER PUBLIC COMPANY DIRECTORSHIPS: QTS Realty Trust, Inc. QUALIFICATIONS:
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MSCI INC.2018 PROXY STATEMENT 13
CORPORATE GOVERNANCE
Director since: 2017 Age: 63 years old Committees: Governance Committee (Chair) | ||
Independent Director
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| Mr. Perold was president of Fidelity Management & Research Company, the investment advisor for Fidelity’s family of mutual funds, until his retirement in 2014. From 2001 to 2009, Mr. Perold was president of Geode Capital Management, LLC, asub-advisor to Fidelity. He is currently a trustee of New York Life Insurance Company’s CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
QUALIFICATIONS:
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26 | MSCI | PROPOSAL NO. 1: ELECTION OF DIRECTORS |
14 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
Director since: 2020 Age: 52 years old Committees: Audit Committee (Member) | ||
Independent Director
QUALIFICATIONS: We believe that Mr. Rattray’s over 25 years of experience in the global investment industry, including his focus on the technological innovation impacting the industry, render him qualified to serve as one of our directors. |
Director since: 2007 Age: 61 years old Committees: Audit Committee (Member) | LINDA H. RIEFLER Independent Director Ms. Riefler retired from Morgan Stanley in February 2013. Ms. Riefler served as the CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
QUALIFICATIONS:
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2022 PROXY STATEMENT | 27 |
Director since: Age: 55 years old Committees: Compensation Committee (Member) | MARCUS L. SMITH Independent Director
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MSCI INC.2018 PROXY STATEMENT 15
CORPORATE GOVERNANCE
| Mr. Smith was CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
PRIOR OTHER PUBLIC COMPANY DIRECTORSHIPS: DCT Industrial Trust, QUALIFICATIONS: We believe that Mr. |
16 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
STRUCTUREOFOUR BOARDAND GOVERNANCE PRACTICES
Henry A. Fernandez has served as the Chairman of our Board since our IPO in November 2007 and CEO since 1998. Rodolphe M. Vallee has been our Lead Director since 2010. In connection with Mr. Vallee’s retirement from the Board, effective May 10, 2018, Mr. Ashe will be succeeding him as Lead Director, effective April 30, 2018. The key attributes and responsibilities of the Chairman and the Lead Director roles that have evolved over time to make MSCI’s leadership both decisive and effective, and enable the Company to execute on its growth strategies, are set forth below. Mr. Ashe has served on the Board since 2013. In his roles as Chair of the Strategy and Finance Committee (the “Strategy Committee”) and as a member of the Audit Committee, Mr. Ashe has been integral in helping to establish the strategic direction of the Company and advising senior management in various key areas, including business operations and technology-related matters. We expect Mr. Ashe to be a strong, independent and effective Lead Director.
Director since: Age: 57 years old Committees: Audit Committee (Member) | |
RAJAT TANEJA
Mr. Taneja is currently the PRIOR OTHER PUBLIC COMPANY DIRECTORSHIPS: Ellie Mae, Inc. (June 2015 to April 2019) QUALIFICATIONS: We believe that Mr. Taneja’s over 30 years of experience in global technology, innovation and research and development render him qualified to serve as one of our directors. |
28 | MSCI | PROPOSAL NO. 1: ELECTION OF DIRECTORS |
Director since: 2020 Age: 65 years old Committees: Governance Committee (Member) | PAULA VOLENT Independent Director
Ms. Volent is currently Vice President and CURRENT OTHER PUBLIC COMPANY DIRECTORSHIPS:
QUALIFICATIONS: We believe that Ms. Volent’s experience as a Chief Investment Officer at a number of institutions and her engagement with the
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2022 PROXY STATEMENT |
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We believe that it is in the best interests of MSCI and its shareholders to combine the roles of Chairman and CEO at this time because it provides the Company with continued unified leadership and direction. We believe Mr. Fernandez is best situated to serve as Chairman because he is the director most knowledgeable about the Company’s products, services and industry, and is in a position to effectively identify strategic priorities, recommend appropriate agendas and lead the execution of our strategy. While the Company’s independent directors bring experience, oversight and expertise from various perspectives and disciplines, Mr. Fernandez’s historical knowledge andin-depth understanding of the Company and its products and services enable him to identify areas of focus for the Board while effectively executing the Company’s strategy. We also believe that combining the role of Chairman and CEO facilitates the flow of information between management and the Board, provides clear accountability and promotes efficient decision making, all of which are essential to effective governance. While we believe that continuing to combine the roles of Chairman and CEO is the most effective leadership structure for our Board and the Company at this time, our Amended and Restated Bylaws (“Bylaws”) andRobust Corporate Governance Policies also permit a structure wherePractices
MSCI’s Board of Directors adhere to governance principles designed to ensure the CEO would not serve contemporaneously as the Chairman of the Board should the separation of such roles be deemed appropriate and in the best interests of MSCI and its shareholders in the future.
MSCI INC.2018 PROXY STATEMENT 17
CORPORATE GOVERNANCE
Our Corporate Governance Policies provide that the Board should have a significant majority of independent directors meeting the independence requirements of the NYSE. Our Board has determined that each of Messrs. Ashe, duPont, Edmunds, Perold, Siguler and Smith, Mmes. Handy, Kinney, Lane and Riefler, and Messrs. Vallee and Tierney (each of whom will not be standing for re-election at the 2018 Annual Meeting and will be retiring from our Board, effective May 10, 2018 and May 1, 2018, respectively) is independent in accordance with the requirements of our Corporate Governance Policies, which follow the NYSE rules and guidelines. In making such determinations, there were no material transactions, relationships or arrangements not disclosed herein under “Other Matters—Certain Transactions” to be considered by the Board in determining whether the director was independent. Therefore, 12 of our 13 current directors are independent, representing 92.3% of the Board. Mr. Fernandez is not independent because of his position as CEO of MSCI.
All members of the Audit Committee, Compensation Committee and Nominating Committee satisfy the independence requirements of the NYSE. In addition, each member of the Audit Committee and Compensation Committee meets the heightened independence standards of the NYSE and the SEC required for audit committee and compensation committee members, respectively.
Board and Individual Director Evaluations
Each year, our directors evaluate thecontinued effectiveness of the Board and excellence in the execution of its committees throughduties. The Board has in place a self-assessment administered by Board members and management. Directors respond to questions designed to elicit information that will be useful in improving Board and committee effectiveness. Such feedback is discussed during all executive sessionsset of governance guidelines reflecting these principles, including the Board’s policy of requiring a significant majority of the Board to be comprised of independent directors; the importance of reflecting a diversity of occupational and where appropriate, addressedpersonal backgrounds and experience on the Board, including with respect to demographics such as gender, nationality, race, ethnicity, geography and age; and the practice of regularly scheduled executive sessions, including sessions of independent directors without members of management. The MSCI Corporate Governance Policies reflect our principles on corporate governance matters.
MSCI also has a Code of Ethics and Business Conduct for directors, executive officers and employees, which is reviewed annually by the Board of Directors. Any amendment to, or waiver of, the Code of Ethics and Business Conduct that applies to one of our directors or executive officers may be made only by the Board or a Board committee.
Corporate Governance Highlights
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| All director |
nominees except our CEO are independent. | ||||
| ● | Strong, independent lead director and independent Board committees. | ||
![]() | One share, one vote. | |||
● | Annual election of directors. | |||
● | Proxy access. | |||
● | Majority vote for uncontested elections and plurality standard for contested elections. | |||
● | No shareholder rights plan (i.e., a poison pill). | |||
● | Board oversight of corporate responsibility, enterprise risk management and IT/cyber risk. | |||
● | Annual Board, committee and director evaluations, with third-party evaluation firm engaged periodically, including in 2019. | |||
● | Executive session of independent directors held after each quarterly Board meeting. | |||
● | Limits on multiple board service. | |||
● | Robust director share ownership and retention guidelines (further enhanced in 2022). | |||
● | Annual review of Code of Ethics and Business Conduct, committee charters and Corporate Governance Policies. | |||
● | Annual off-season shareholder outreach around corporate responsibility, including regular director participation. | |||
● | Full Board participation in succession and progression planning. | |||
● | Targeted director education program, including leveraging in-house expertise to educate directors on climate. | |||
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All new directors participate in a director orientation program which includes in-person briefings by senior management on the Company’s strategic plans, its financial statements and its key policies and practices. Directors are encouraged and provided with opportunities to attend educational sessions on subjects that would assist them in discharging their duties. Pursuant to its Director Education Policy, the Company will reimburse directors for reasonable costs incurred from attending these sessions. In addition to external educational opportunities, directors participate in onsite educational sessions, including an annual review of leading corporate governance practices by corporate governance experts, briefing sessions on
18 MSCI INC.2018 PROXY STATEMENT
MSCI | CORPORATE GOVERNANCE
topics that present special risks and opportunities, updates on accounting topics, and product line reviews presented by the heads of each of our product segments.
We provide institutional investors with many opportunities to provide feedback to our Board and senior management. In addition to maintaining an ongoing robust dialogue with our shareholders and embracing a targeted institutional shareholder outreach strategy, from time to time, we invite shareholders to present their views on the Company to the Board, and our CFO and/or our Head of Investor Relations regularly participate in investor conferences during which they meetone-on-one with institutional shareholders to hear their views on our business and practices.
As described in more detail on page 5 of this Proxy Statement, before, during and following the 2017 proxy season, we engaged with certain of our institutional shareholders (who represent a majority of our outstanding common shares) to discuss corporate governance and executive compensation related matters. The governance related discussions focused on various topics, including Company strategy, management changes, corporate social responsibility practices and the new director onboarding experience. Our engagement with shareholders on executive compensation is further described on page 44 of this Proxy Statement.
Our directors and management recognize the benefits that come from providing our shareholders with visibility and transparency into our business, as well as knowing our shareholders’ positions on issues that are important to them. We are committed to continuing to maintain an active dialogue with our shareholders.
Attendance at Board Meetings and Annual Meeting of Shareholders
Our Board met nine (9) times,held non-employee director executive sessions following seven (7) of those meetings and took action by unanimous written consent on one (1) occasion during 2017. Each director attended at least 75% of the total meetings of the Board and committees on which the director served that were held while the director was a member.
Overall attendance at Board and committee meetings during 2017 was at least 93% among our directors who served on the Board and were members of such committees at the time of such meetings. Discussions between the Board and management on strategic direction, new business opportunities and the scope and mix of the Company’s products were held at each quarterly Board meeting. In addition to formal meetings, members of our Board informally interact with senior management on a periodic basis.
Our Corporate Governance Policies state that directors are expected to attend annual meetings of shareholders. In 2017, all of our directors who were on the Board at the time attended our annual meeting of shareholders.
Meetings and Committees of the Board of Directors
Our Board has adopted a written charter for each of the Audit Committee, Compensation Committee, Nominating Committee and Strategy Committee setting forth the roles and responsibilities of each committee. Each committee annually reviews and assesses the adequacy of its charter and recommends any proposed changes to the Board for approval. To access these charters, click on the “Corporate Governance” link found on our website’s Investor Relations homepage (http://ir.msci.com). Information contained on our website is not incorporated by reference into this Proxy Statement or any other report we file with the SEC.
MSCI INC.2018 PROXY STATEMENT 19
CORPORATE GOVERNANCE
The table below provides detail on the composition of each of our designated standing committees for (1) the period beginning on March 21, 2017 and ending on April 29, 2018 and (2) the committee composition which will become effective on April 30, 2018.
Name of Director
| Audit Committee
| Compensation
| Nominating
| Strategy
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2017
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2018
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2017
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2018
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2017
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2018
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2017
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2018
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Henry A. Fernandez
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Robert G. Ashe
| ü
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| Chair
| Chair
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Benjamin F. DuPont
| Chair
| ü
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Wayne Edmunds
| ü
| Chair
| ü
| ü
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Alice W. Handy
| ü
| ü
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Catherine R. Kinney
| Chair
| ü
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Wendy E. Lane
| ü
| ü
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Jacques P. Perold
| Chair
| ü
| ü
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Linda H. Riefler
| ü
| Chair
| ü
| ü
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George W. Siguler
| ü
| ü
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Marcus L. Smith(1)
| ü
| ü
| ü
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Patrick Tierney(2)
| ü
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Rodolphe M. Vallee(2)
| Chair
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Composition and Board Refreshment
20 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
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Effective April 30, 2018, the Audit Committee will consist of Wayne Edmunds (Chair), Robert G. Ashe, Alice W. Handy, and Marcus L. Smith. Each of Messrs. Edmunds, Ashe, and Smith and Ms. Handy are independent within the meaning of the NYSE and SEC standards of independence for directors and audit committee members. Each of them also satisfies NYSE financial literacy requirements and has accounting or other relevant management experience. The Board has also designated Messrs. Ashe and Edmunds as “audit committee financial experts” as defined by SEC rules.
MSCI INC.2018 PROXY STATEMENT 21
CORPORATE GOVERNANCE
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Effective April 30, 2018, the Compensation Committee will consist of Linda H. Riefler (Chair), Wendy E. Lane and Wayne Edmunds. Each of Mmes. Riefler and Lane and Mr. Edmunds is independent within the meaning of the NYSE and SEC standards of independence for directors and compensation committee members. Each of them also qualify as“non-employee directors” for purposes of Rule16b-3 under the Exchange Act and satisfy the requirements of “outside directors” pursuant to §162(m) of the IRC.
22 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
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Effective April 30, 2018, the Nominating Committee will consist of Jacques P. Perold (Chair), Benjamin F. duPont, Linda H. Riefler and George W. Siguler.
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Effective April 30, 2018, the Strategy Committee will consist of Robert G. Ashe (Chair), Henry A. Fernandez, Catherine R. Kinney, Jacques P. Perold and Marcus L. Smith.
MSCI INC.2018 PROXY STATEMENT 23
CORPORATE GOVERNANCE
Management is responsible for identifying, evaluating, managing and mitigating the Company’s exposure to risk. It is the Board’s responsibility to oversee the Company’s risk management process and to ensure that management is taking appropriate action to identify, manage and mitigate key risks. The Board administers its risk oversight responsibilities both through active review and discussion of key risks facing the Company and by delegating risk oversight responsibilities to committees for further consideration and evaluation. The following table summarizes the role of the Board and each of its committees in overseeing risk.
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24 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
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The NominatingGovernance Committee’s charter requires it to review candidates’ qualifications for membership on the Board or a committee of the Board, including making a specific determination as to the independence of each candidate based on the criteria approved by the Board (and taking into account the enhanced independence, financial literacy and financial expertise standards that may be required under applicable law or NYSE rules for audit committee membership purposes, and heightened independence standards that may be required under law or NYSE rules for compensation committee membership purposes). If the NominatingGovernance Committee determines that adding a new director is advisable, it will recommend such individual to the Board for appointment as a member of the Board and any committees.committees (as applicable).
Consistent with our Corporate Governance Policies, when appointing directors, the Board takesseeks members who combine sound business judgment, professionalism and a broad spectrum of experience and expertise with a reputation for the highest standards of ethics and integrity. Directors should have experience in positions with a high degree of responsibility, be leaders or senior managers in the companies or institutions with which they are or were affiliated and be selected based upon contributions they can make to the Board and management and their ability to represent and advance the interests of the Company and its shareholders. The Board will also take into account the diversity of a candidate’s perspectives, background and other demographics. Our diversity objectives are also implemented and monitored through periodic reviews by the NominatingGovernance Committee of the composition of the Board and its committees in light of the then-current challenges and needs of the Board, the Company and each committee, which result in determinations as to whether it may be appropriate to make changes after considering issues of judgment, diversity, age, skills, background and experience. The composition of our current Board demonstrates the Board’s commitment to diversity in a number of areas. Women represent approximatelyone-third30% of our current Board.director nominees. Our directors are also ofhave differing backgrounds, educations, businesses and otherprofessional experiences, skills, ages, national origins and viewpoints. See “Proposal No. 1—Election of Directors.”
Pursuant to the authority granted in its charter, the Nominating Committee retains a professional search firm on an ongoing basis to assist in the process of identifying, evaluating and conducting due diligence on potential director candidates. Each of Messrs. Perold and Smith, who joined the Board in March 2017 and November 2017, respectively, was identified as a potential candidate by a professional search firm. Using a search firm provides additional assurance to the Nominating Committee that it is conducting a broad search and looking at a diverse pool of potential candidates.
Our Board also has shown an ongoing commitment to Board refreshment and to having highly qualified, independent perspectives in the boardroom. FourFive of the Company’s independent directorsdirector nominees have been added to the Board since the beginning of 2014.2017. The average tenure of the Boardindependent director nominees is currently 6.166.4 years. The average tenure is 7.2 years (excluding Messrs. Valle and Tierney who will not be standing for re-election and will be retiring from our Board, effective May 10, 2018 and May 1, 2018, respectively).if Mr. Fernandez is included. Also, under our Corporate Governance Policies, director candidatesdirectors should not stand for re-election following their 72nd birthday. Since 2019, two directors have retired following their 72nd birthday and two directors decided not to stand for re-election. These retirements and decisions have provided us with opportunities for Board refreshment.
Jacques P. Perold appointed | Marcus L. Smith appointed | Patrick Tierney retired | Rodolphe M. Vallee retired | Wendy E. Lane retired | Paula Volent and Sandy Rattray appointed | Alice W. Handy and George W. Siguler retired | Benjamin DuPont retired | Rajat Taneja appointed to Board | ||||||||||
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March 6, 2017 | November 2, 2017 | May 1, 2018 | May 10, 2018 | April 25, 2019 | February 26, 2020 | April 28, 2020 | April 27, 2021 | June 1, 2021 |
Diversity InitiativesDirector Re-nomination
The CompensationGovernance Committee also assesses the performance of current directors in its evaluation of current directors for re-nomination to the Board or re-appointment to any Board committees.
2022 PROXY STATEMENT | 31 |
New Director Search Process
Our newest director, Rajat Taneja, was appointed to the Board in 2021. Mr. Taneja has extensive global technology, innovation and research and development experience. His deep knowledge around cybersecurity and risk oversight aligned with the objective of the Audit Committee, to which he was appointed. The appointment of Mr. Taneja was the result of the rigorous search process outlined below.
Our Board is regularly updated oncommitted to diversity and talent management at the Company. In 2017, the Company celebrated our diversity through various events and initiatives around the world, including:
1 | The Governance Committee, with the feedback of the full Board, identifies key skills that would best serve the future needs of the Board and the Company. Pursuant to the authority granted in its charter, the Governance Committee retains a professional search firm to assist in the process of identifying, evaluating and conducting due diligence on potential director candidates. The Governance Committee instructs the search firm to focus on candidates with relevant industry experience and to seek a diverse slate of candidates. Using a search firm provides additional assurance to the Governance Committee that it is conducting a comprehensive search and evaluating a broad and diverse pool of potential candidates. Additionally, the Governance Committee solicits input from members of management and the Board. | |||
2 | From the candidates provided by the third-party search firm as well as input from directors and management, the Governance Committee identifies a short list of high-potential candidates, and the search firm then conducts an initial assessment of these candidates’ skills, experience, background and availability to commit to Board service. The Governance Committee Chair meets with a number of candidates. Certain candidates also meet with members of the Governance Committee, the Chairman and the Lead Director. | |||
3 | The Governance Committee presents qualified candidates to the Board. In reviewing the potential candidates, the Board takes into account the qualifications discussed in “Director Qualifications” of this Proxy Statement. Following discussion and confirmation of the independence of such candidates, the Board formally appoints candidates to the Board. | |||
4 NEW DIRECTOR | ● The Board appointed Rajat Taneja to the Board, effective June 1, 2021. ● Mr. Taneja’s Qualifications: ● Over 30 years of global technology, innovation and research and development experience. ● Leverages his experience to provide invaluable insight into the continuing transformation of MSCI’s data and technology capabilities. ● Prior public company board experience, including service on the Technology and Cybersecurity Committee and Governance and Corporate Responsibility Committee. | |||
Proxy Access
In response to shareholder engagement, we amended our Bylaws in 2020 to permit a shareholder, or a group of up to 20 shareholders, owning at least three percent of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s annual meeting proxy materials director nominees constituting the greater of two directors or twenty percent of the total number of directors on the Board, provided that such shareholder(s) and nominee(s) satisfy the requirements specified in the Bylaws.
32 | MSCI | CORPORATE GOVERNANCE |
Independent Board | ![]() | |
Under the MSCI Corporate Governance Policies, the full Board affirmatively determines the independence of directors and reviews the financial and other relationships between the independent directors and MSCI as part of its assessment of director independence. The Governance Committee also makes specific determinations as to the independence of each candidate when reviewing candidates’ qualifications for membership on the Board or a committee of the Board. Director independence is also monitored by the full Board on an ongoing basis. |
Our Corporate Governance Policies provide that the Board should have a significant majority of independent directors meeting the independence requirements of the NYSE. Our Board has determined that each of Messrs. Ashe, Edmunds, Perold, Rattray, Smith, and Taneja and Mmes. Kinney, Riefler and Volent is independent in accordance with the requirements of our Corporate Governance Policies, which follow the NYSE rules and guidelines. In making such determinations, there were no material transactions, relationships or arrangements not disclosed herein under “Other Matters—Certain Transactions” to be considered by the Board in determining whether each director was independent. Therefore, 9 of our 10 current directors are independent. Only Mr. Fernandez is not independent because of his position as CEO of MSCI.
All members of the Audit Committee, Compensation Committee, Governance Committee and Strategy Committee satisfy the independence requirements of the NYSE. In addition, over 20 global chapterseach member of the WLF representing 13 countries celebrated International Women’s Day withAudit Committee and Compensation Committee meets the “Be Bold for Change” theme. To further celebrate this important day, MSCI attended the Catalyst dinner as a patron sponsor and also had excellent participation inheightened independence standards of the NYSE bell ringing sponsored by Women in ETFsrequired for audit committee and partner organizations and other events at stock exchanges around the world.
compensation committee members, respectively.
MSCI INC.2018 PROXY STATEMENT 25
CORPORATE GOVERNANCE
Succession PlanningBoard Leadership
The CompensationGovernance Committee is actively involved in talent management. This includes ongoing reviews of our leadership bench and succession plans globally, with a focus on developing and retaining top talent atresponsible for the senior management level, including the CEO. The Lead Director oversees an annualcontinuing review of the CEO. During 2017,governance structure of the Board, and for recommending to the Board those structures and practices best suited to MSCI and its stockholders. The Governance Committee and the Board recognize that different structures may be appropriate under different circumstances.
We believe that it is in the best interests of MSCI and its shareholders to combine the roles of Chairman and CEO at this time, alongside a robust and independent Lead Director. We believe Mr. Fernandez is best situated to serve as Chairman because he is the director most knowledgeable about the Company’s products, services and industry, and is in a position to effectively identify strategic priorities, recommend appropriate agendas and lead the execution of our strategy. We also believe that combining the role of Chairman and CEO facilitates the flow of information between management and the Board, provides clear accountability and promotes efficient decision making, all of which are essential to effective governance.
A strong, independent Lead Director with clearly defined duties and responsibilities further enhances the contributions of MSCI’s independent directors, which have been and continue to be substantial. Robert G. Ashe has been our Lead Director since April 2018. As Lead Director, Mr. Ashe has significant authority and responsibilities to provide for an effective and independent Board. At the same time, the Company’s other independent directors bring experience, oversight and expertise from various perspectives and disciplines.
The Board strongly believes that its leadership structure strikes the right balance of allowing our Chairman and CEO to promote a clear, unified vision for the Company’s strategy, providing the leadership critical for effectively and efficiently implementing the actions needed to ensure strong performance over the long term, while ensuring robust, independent oversight by the Board and the Lead Director. The key attributes and responsibilities of the Chairman and the Lead Director roles (which are set forth below) have evolved over time to make MSCI’s leadership both decisive and effective, and to enable the Company to execute on its growth strategies. |
2022 PROXY STATEMENT | 33 |
CHAIRMAN AND CEO | LEAD DIRECTOR | ||
● Unparalleled historical knowledge and depth of understanding of the Company and its businesses ● Oversees the Executive Committee (which includes all of our executive officers) in its day-to-day management of the Company ● Chairs Board meetings and annual shareholder meeting ● Works with the Lead Director to set agendas for Board meetings (which the Lead Director approves) ● Collaborates with the Board on the Company’s strategy and leads management in implementing that strategy ● Meets frequently with clients and shareholders and communicates feedback to the Board and senior management ● Manages the development of senior management and our businesses to succeed in a dynamic and competitive landscape | ● Strong and independent leadership style ● Appointed annually by the Board’s independent directors ● Presides at all meetings of the Board at which the Chairman is not present and has the authority to call independent director sessions ● Approves other Board related materials (directors, acting through the Lead Director, may propose matters to be included on the agenda for a meeting) ● Approves Board meeting agendas and schedules to assure sufficient time for discussion of all items ● Facilitates a strong, independent oversight function by leading executive sessions of independent directors at least after every quarterly Board meeting ● Facilitates communication between the Chairman and independent directors ● Leads Board and individual director evaluations ● Meets directly with management other than the CEO and President & COO ● Consults and directly communicates with shareholders and other key constituents, as appropriate ● Collaborates with the Compensation Committee to oversee management succession planning efforts |
While we believe that continuing to combine the roles of Chairman and CEO is the most effective leadership structure for our Board and the Company at this time, our Bylaws and Corporate Governance Policies also permit a structure where the CEO would not serve contemporaneously as the Chairman of the Board should the separation of such roles be deemed appropriate and in the best interests of MSCI and its shareholders in the future.
Committees of the Board of Directors
Our Board has adopted a written charter for each of the Audit Committee, Compensation Committee, Governance Committee and Strategy Committee setting forth the roles and responsibilities of each committee. The Board and each committee may, from time-to-time, form and delegate authority to subcommittees when appropriate. Each committee annually reviews and assesses the adequacy of its charter and recommends any proposed changes to the Board for approval. You may access these charters on our website’s Investor Relations homepage (https://ir.msci.com).
The table below provides detail on the composition of each of our designated standing committees as of March 16, 2022.
Name of Director | Audit Committee | Compensation Committee | Governance Committee | Strategy Committee | ||||
Henry A. Fernandez(1) | ||||||||
Robert G. Ashe | ![]() | ![]() | ||||||
Wayne Edmunds | ![]() | ![]() | ||||||
Catherine R. Kinney | ![]() | |||||||
Jacques P. Perold | ![]() | ![]() | ||||||
Sandy C. Rattray | ![]() | ![]() | ||||||
Linda H. Riefler | ![]() | ![]() | ||||||
Marcus L. Smith | ![]() | ![]() | ||||||
Rajat Taneja(2) | ![]() | |||||||
Paula Volent | ![]() | ![]() |
(1) | Mr. Fernandez is not a formal member of any committee, but he attends most meetings for each committee. | ![]() | Chair | ||
(2) | Mr. Taneja was appointed to the Board and to the Audit Committee on June 1, 2021. | ![]() | Member |
34 | MSCI | CORPORATE GOVERNANCE |
AUDIT AND RISK COMMITTEE | ||
MEMBERS: Wayne Edmunds (Chair) MEETINGS HELDIN 2021: 9 ● All members are independent within the meaning of the NYSE standards of independence for directors and audit committee members. ● All members satisfy NYSE financial literacy requirements, each of Messrs. Ashe, Edmunds and Rattray and Ms. Riefler have accounting or other related financial management expertise, and Messrs. Ashe and Edmunds have been designated as “audit committee financial experts,” as defined by SEC rules. | PRIMARY RESPONSIBILITIES: ● Oversees the integrity of the Company’s financial statements, internal controls over financial reporting and risk assessment and risk management (including major financial risk exposures and cybersecurity risks). ● Appoints and determines the compensation of the independent auditor. ● Evaluates the qualifications, independence and performance of the independent auditor, including obtaining a report of the independent auditor describing the items set forth in the Audit and Risk Committee’s charter, including those required by the Public Company Accounting Oversight Board. ● Pre-approves audit and permitted non-audit services. ● Reviews and evaluates the audit plan, performance, responsibilities, budget and staffing of the Company’s internal audit function. ● Reviews and discusses with management and the independent auditor the annual audited and quarterly unaudited financial statements included in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, respectively. ● Establishes procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters, and the review of any submissions received pursuant to such procedures. ● Reviews reports from management relating to the status of compliance with legal and regulatory requirements. ● Reviews with management (i) the Company’s key business risks, including the Company’s major regulatory, litigation and financial risk exposures and technology and cybersecurity risks, (ii) policies and practices with respect to risk governance, risk assessment and risk management, and (iii) the steps that have been taken to assess, monitor and control such risks. ● Reviews the Company’s enterprise risk management program, including its risk governance framework and risk management practices that facilitate the identification, assessment, mitigation and public reporting of risks that may affect the Company. KEY AREAS OF FOCUS IN 2021: ● Climate risk considerations in light of increasing interest by stakeholders. ● Risks associated with IT and cybersecurity. ● Risk management and governance of data and research used in our ESG and Climate business. The Audit Committee changed its name in 2021 to the Audit and Risk Committee to provide greater alignment with the full duties and responsibilities outlined in the Audit and Risk Committee’s Charter and reflect the broad scope of its oversight responsibilities. Further details on the role of the Audit and Risk Committee, as well as the Audit and Risk Committee Report, may be found in “Audit Matters—Audit and Risk Committee Report” on page 97 of this Proxy Statement. |
Effective June 1, 2021, Rajat Taneja began serving on the Audit and Risk Committee. Mr. Taneja is independent within the meaning of the NYSE standards of independence for audit committee members and satisfies the NYSE financial literacy requirements.
2022 PROXY STATEMENT | 35 |
COMPENSATION, TALENT AND CULTURE COMMITTEE
MEMBERS: Linda H. Riefler (Chair) MEETINGS HELD IN 2021: 8 ● All members are independent within the meaning of the NYSE standards of independence for directors and compensation committee members. ● All members qualify as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act. | PRIMARY RESPONSIBILITIES: ● Reviews the Company’s compensation strategy and reviews and approves the Company’s compensation and benefits policies generally, including reviewing and approving any incentive compensation and equity-based plans of the Company that are subject to Board approval and the Company’s stock ownership guidelines for Executive Committee members. ● Identifies, reviews and approves corporate goals and objectives to be used in the Company’s compensation programs, sets compensation for the Company’s executive officers and such other members of senior management as the Committee determines (the “Executives”), and evaluates each Executive’s performance, each in light of such goals and objectives. ● Reviews and approves the compensation of the Company’s CEO and each of the Company’s other Executives, including: base salary; annual and long-term incentive compensation; employment, severance and change in control agreements; and any other compensation, ongoing perquisites or special benefit items. ● Reviews non-employee director compensation every two years and recommends changes to the Board, when appropriate. ● Periodically reviews, in consultation with the CEO, the Company’s management succession planning and oversees the Company’s talent management, progression planning, career progression and retention strategies and programs, including the Company’s learning and development and DE&I programs. ● At least annually, reviews the Company’s DE&I programs including their key performance metrics. ● Periodically reviews the Company’s initiatives and strategies relating to corporate culture, including considering the Company’s performance and pay-for-performance alignment when reviewing the workplace environment and culture and periodic reviews of the results of the Company’s employee engagement and external surveys. ● Reviews and discusses with management the “Compensation Discussion and Analysis” section of the Company’s annual proxy statement, prepares the Compensation, Talent and Culture Committee Report required by SEC rules and recommends to the Board the inclusion of each in the Company’s annual proxy statement (included on pages 57 and 86 of this Proxy Statement, respectively). ● Reviews and makes recommendations to the Board with respect to the frequency with which the Company will conduct “Say on Pay” votes, taking into account the results of the most recent shareholder advisory vote on frequency of “Say on Pay” votes, if any, and reviews and approves the proposals regarding the “Say on Pay” vote and the frequency of the “Say on Pay” vote to be included in the Company’s proxy statement. ● Considers the independence requirements of the NYSE prior to selecting a compensation consultant, legal counsel or other advisor and evaluates the performance of such advisors and approves all related fees. ● At least annually, reviews and assesses the adequacy of the Company’s Global Human Rights Policy, including any related disclosures, and recommends any proposed changes to the Board, if required. KEY AREAS OF FOCUS IN 2021: ● In light of the COVID-19 pandemic, received ongoing reports from management around employee well-being, remote work resources and the transition to the Future of Work, our new way of working that provides greater flexibility for a vast majority of our employees. ● Focused on enhancing DE&I initiatives. ● Advised management on linking target annual cash incentives to achievement of individual DE&I goals. ● Focused on MSCI’s organizational design and development to align with an enhanced focus on complete client-centricity. Compensation Committee Interlocks and Insider Participation: None. The Compensation and Talent Management Committee changed its name in 2021 to the Compensation, Talent and Culture Committee to provide more clarity and transparency on the committee’s oversight of talent management and corporate culture and reflect the broad scope of its oversight responsibilities. |
Benjamin F. duPont ceased serving on the Compensation Committee metin connection with his retirement from the Board, effective April 27, 2021.
36 | MSCI | CORPORATE GOVERNANCE |
GOVERNANCE AND CORPORATE RESPONSIBILITY COMMITTEE
MEMBERS: Jacques P. Perold (Chair) MEETINGS HELDIN 2021: 5 ● All members are independent within the meaning of the NYSE standards of independence for directors. | PRIMARY RESPONSIBILITIES: ● Annually reviews the size and composition of the Board and its committees in light of the current challenges and needs of the Board, the Company and each committee and considers the skills, background and experience of each director in doing so. ● Oversees searches for candidates for election to the Board and recommends criteria and individuals for appointment to the Board and its committees. As part of the search process for each new director, focuses on identifying women and other diverse talent in the pool of candidates. ● Retains any search firm that assists the Governance Committee in identifying candidates and maintains sole authority to approve all such search firms’ fees and other retention terms. ● Makes recommendations to the Board as to determinations of director independence. ● Oversees and approves the process and guidelines for the annual evaluation of performance and effectiveness of the Lead Director, the Board and its committees, and individual directors. ● Oversees the Company’s policies and initiatives related to corporate responsibility matters, including environmental stewardship (such as related to climate change) and other sustainability matters. Reviews with Company’s management, including the Chief Responsibility Officer, the Company’s related practices, disclosures, ratings from various providers and risks. ● Evaluates the Company’s shareholder engagement practices and considers feedback received from shareholders. ● At least annually, reviews and assesses the adequacy of the Company’s Corporate Governance Policies and Code of Ethics and Business Conduct and oversees compliance therewith. Reviews with Company’s management, including the Head of Compliance, the Company’s Compliance program, priorities, initiatives, risks and mitigations. ● At least annually, reviews and assesses the adequacy of the Company’s Related Person Transactions Policy and reviews related person transactions pursuant to the Related Person Transactions Policy. ● At least annually, reviews and assesses the adequacy of the Company’s Corporate Political Activities Policy, including any related disclosures, and recommends any proposed changes to the Board, if required. KEY AREAS OF FOCUS IN 2021: ● On an ongoing basis, reviewed Board composition and Board skills needed, with a focus on enhancing diversity in ongoing director searches and led the director search process resulting in the appointment of one new director in 2021. ● Focused on policies and initiatives related to the Company’s carbon commitments, including the goal of net-zero emissions before 2040. ● Drove enhancements to the Board education program by increasing informal remote- learning sessions for deep-dives on certain areas of the Company’s business, including on ESG and climate. The Nominating and Corporate Governance Committee changed its name in 2021 to the Governance and Corporate Responsibility Committee to provide more clarity and transparency on the committee’s oversight of corporate responsibility, ESG and climate and other sustainability matters and to reflect the broad scope of its oversight responsibilities. |
Mr. duPont ceased serving on several occasions, includingthe Governance Committee in connection with his retirement from time to time with outside consultants, in furtherancethe Board, effective April 27, 2021.
Table of its succession planningContents
2022 PROXY STATEMENT | 37 |
STRATEGY AND FINANCE COMMITTEE
MEMBERS: Robert G. Ashe (Chair)Jacques P. Perold Sandy C. Rattray MEETINGS HELDIN 2021: 10 ● All members are independent within the meaning of the NYSE standards of independence for directors. | PRIMARY RESPONSIBILITIES: ● Evaluates management’s recommendations with respect to the strategic direction of the Company and regularly consults with the Board on the objectives of the Company’s strategic plans and management’s implementation of such plans. ● Reviews and makes recommendations with respect to the agenda for Board strategy meetings with management, taking into account issues important to the full Board. ● Reviews and makes recommendations to the Board with respect to any mergers, combinations, acquisitions, divestitures, joint ventures, minority investments and other strategic investments, and any financings for mergers, acquisitions and other significant financial transactions, in each case requiring the Board’s approval. ● Reviews and oversees management’s plans and objectives for the capitalization of the Company, including target leverage levels and the structure and amount of debt and equity required to meet the Company’s financing needs. ● Oversees the Company’s share repurchase programs, subject to Board-approved policies. ● Reviews and recommends for approval by the Board changes to the Company’s dividend policy. KEY AREAS OF FOCUS IN 2021: ● Advised management on its capital allocation program, including with respect to its approach to share repurchases, refinancing the Company’s debt and increasing the Company’s quarterly dividend. ● Focused on the competitive landscape and advised management on merger, partnership and acquisition opportunities, with a focus on the private asset segment, including the acquisition of Real Capital Analytics. ● Collaborated with management on the agenda for the Board’s two-day strategy session to ensure alignment with internal investments and growth opportunities. |
38 | MSCI | CORPORATE GOVERNANCE |
Engagement and executive development initiatives, which are considered in the contextEvaluation of our strategic goals. High potential leaders are given exposure to Board members through formal presentations
Attendance at Board or committeeMeetings and Annual Meeting of Shareholders
EACH DIRECTOR ATTENDED AT LEAST | ||||||
10 | 10 | 4 | 75% | |||
BOARD MEETINGS
| EXECUTIVE SESSIONS, WHICH FOLLOWED THE BOARD MEETINGS | OCCASIONS WHERE THE BOARD TOOK ACTION BY UNANIMOUS WRITTEN CONSENT | OF THE TOTAL BOARD MEETINGS AND COMMITTEE MEETINGS ON WHICH THE DIRECTOR SERVED THAT WERE HELD WHILE THE DIRECTOR WAS A MEMBER |
Our Board met ten times, held independent director executive sessions following all ten of those meetingsone-on-one and took action by unanimous written consent on four occasions during 2021. Each director attended at least 75% of the total meetings with individual directors and participation in other Board activities. The Compensation Committee is regularly updated with respect to the pipeline of qualified talent for critical roles at an annual meeting which is attended by all Board members. In 2017, the Board followed this process when implementing succession plans for our executive officers and committees on which the director served that were held while the director was a member.
Discussions between the Board and management on strategic direction, new business opportunities and the scope and mix of the Company’s products were held at each quarterly Board meeting. In addition to formal meetings, members of our Executive CommitteeBoard informally interact with senior management on a periodic basis and implementedparticipate in informal director education sessions.
Our Corporate Governance Policies state that directors are expected to attend the following changes:
An important part of cultivating talent at MSCI is ensuring that employees remain engaged. As such, the Compensation Committee is provided with updates on employee engagement. In 2017, the Company saw improved engagement of employees across the Company. For example, in 2017, full engagement for the Company improved by 8.6% basedwere on the Company’sBoard at the time attended our annual employee engagement survey.meeting of shareholders.
Our Corporate Governance Policies provide that our Lead Director will preside overnon-employee director sessions. The Lead Director presided over sevennon-employeeten independent director sessions during 2017.2021. The Board’s standing committees also have a practice of holding executive sessions after their quarterly meetings. Our Corporate Governance Policies further provide that if anynon-employee directors are not independent, then the independent directors will meet at least once a year in an independent director session and the Lead Director will preside over each such independent director sessions.session. During 2017,2021, allnon-employee directors were independent.
Director Education and Orientation Program
Directors are encouraged and provided with opportunities to attend educational sessions on subjects that can assist them in performing their duties. Pursuant to the Director Education Policy, the Company will reimburse directors for reasonable costs incurred from attending these sessions. In addition to external educational opportunities, directors participate in educational sessions, including product line reviews presented by the heads of our product lines. Directors also participate in an annual review of leading corporate governance practices by corporate governance experts, briefing sessions on topics that present special risks and opportunities and updates on accounting topics. The Company is also part of a peer-engaged program designed to enhance director performance, and we leverage virtual platforms to provide deep dive sessions on certain aspects of MSCI’s business outside of quarterly meetings. In 2021, the Board held virtual learning sessions on, among other things, climate change science, climate investments, net-zero commitments, our go-to-market strategy and our data and technology strategy. In 2022 and following a return to in-person meetings, these virtual sessions are expected to continue and will be used to further educate the Board on, among other things, climate-related risks and opportunities and DE&I initiatives.
All new directors participate in a director orientation program that includes briefings by senior management representing the heads of product lines and key functional areas on topics that include, among others, the Company’s strategic plans, capital structure, product overviews, historical financial performance and key policies and practices, including compliance and trading policies. New directors are also encouraged to attend all committee meetings during their first year on the Board. In 2021, Mr. Taneja joined the Board while the Company was still in a remote working environment. His director orientation program was conducted virtually, which allowed for more streamlined sessions with increased global participation by senior management.
2022 PROXY STATEMENT | 39 |
Board and Individual Director Evaluations
In addition to the ongoing assessment of the functioning of the Board, each year, our directors formally evaluate the effectiveness of the Board and its committees through a self-assessment administered by our directors and management. Directors respond to questions designed to elicit information that will be useful in improving Board and committee effectiveness. Such feedback is discussed during executive session and, where appropriate, addressed with management. The process for this annual feedback is set forth below.
1 INITIATION OFPROCESS | The members of the Governance Committee provide their thoughts on the factors to be used in evaluating the Board, its committees and individual directors. The Corporate Secretary prepares a director self-assessment questionnaire based on these factors. In 2021, MSCI’s Chief Diversity Officer also reviewed and provided updates to the questionnaire to ensure that it properly reflected the importance of DE&I considerations. The Governance Committee also oversees and approves the process and guidelines for the annual evaluation of the performance and effectiveness of the Lead Director. | ||
2 EVALUATION | Each director then completes an anonymous self-assessment questionnaire covering a range of topics, including structure, culture, and roles of the Board and its committees. The Lead Director also conducts individual director evaluations through interviews with each director on an annual basis. | ||
3 DISCUSSION | The Corporate Secretary compiles the quantitative and qualitative data from the questionnaires and consults with the Lead Director and the Chair of the Governance Committee on the results. The Lead Director and Chair of the Governance Committee review the results with the full Board in executive session. | ||
4 FOLLOW-UP | The Lead Director and Chair of the Governance Committee then discuss with the management the feedback provided by the Board and any enhancements in practices that may be warranted. | ||
5 FEEDBACK | ENHANCED REVIEW OF STRATEGIC GOALS: ● Periodic review with Board on strategic initiatives ● Board and committee agendas increasingly focus on “forward-looking” topics | INCREASED FOCUS ON ESG AND CLIMATE: ● Governance Committee assigned responsibility for ESG and climate oversight ● Chief Responsibility Officer provides quarterly reports to the Governance Committee ● DE&I goals required for all Managing Directors, and tied to individual compensation ● For Executive Committee members, climate commitment goals added to KPI goals | ||
ENHANCED DIRECTOR EDUCATIONPROGRAM: ● Joined peer-engaged program designed to enhance director performance ● Leveraged virtual platforms to provide deep- dive sessions on certain aspects of MSCI’s business outside of quarterly meetings, including climate | SUCCESSION PLANNING ANDTALENT MANAGEMENT: ● President & COO meets quarterly in executive session with independent directors ● Potential successors to senior management invited to speak at Board meetings for additional exposure ● Succession planning at levels beyond the Executive Committee; accelerated development of current internal candidates at all levels | |||
40 | MSCI | CORPORATE GOVERNANCE |
The Board may also periodically engage a third-party evaluation firm as part of this process. In 2019, a third-party evaluation firm met with certain members of senior management and members of the Board. The feedback from the third-party evaluation firm was considered by the Board and, where appropriate, the Board recommended enhancements to its practices based on such feedback.
Shareholder Engagement
By the Numbers: Shareholder Engagement in 2021 | ||
WE HELD OVER 300 MEETINGS with our shareholders, prospective shareholders and sell-side analysts, during which we MET WITH SHAREHOLDERS REPRESENTING ~58% OF OUR SHARES OUTSTANDING, with participation at certain meetings by our CEO, President & COO, CFO, Head of Investor Relations, Chief Responsibility Officer and other members of senior management | 10 INVESTOR CONFERENCES AND 8 NON-DEAL ROADSHOWS AND ANALYST SPONSORED EVENTS to discuss topics including long-term growth opportunities, strategic execution, financial performance, capital allocation and corporate responsibility | |
SUCCESSFUL INVESTOR DAY which highlighted the achievement of our financial performance over the last several years, as well as provided a deeper understanding of our key strategic initiatives and an update on our long-term financial outlook | REWARDING CORPORATE RESPONSIBILITY ROADSHOW where we met with our top shareholders representing more than 40% of our outstanding shares to discuss our corporate responsibility practices |
We believe that engaging with our shareholders, prospective shareholders and sell-side analysts is the best way to address the issues that matter most to them. Dialogue with these constituencies helps us understand their perspectives on the Company’s goals and expectations for performance, as well as identify issues that might affect our long-term strategy, corporate governance and compensation practices. As such, we offer several opportunities to provide feedback to our Board and senior management, including inviting certain shareholders to address the Board to present their views on the Company.
Our Investor Relations team leads year-round outreach efforts with our investors and the investment community. During these engagements, we typically discuss topics such as market trends affecting our industry, the competitive environment, our go-to-market strategy, our financial performance and our overall outlook for the Company. In February 2021, we hosted an Investor Day to reiterate our growth opportunities and share management’s strategy for taking advantage of those opportunities.
We also engage with shareholders before, during and after the proxy season, including by hosting a Corporate Responsibility Roadshow each winter, to review and receive feedback on the Company’s governance practices, our corporate responsibility efforts and human capital management strategies and the design of our executive compensation program. The feedback we receive from these discussions, as well as from third-party rating agencies, is carefully considered by the Board, the Governance Committee and the Compensation Committee.
During the Corporate Responsibility Roadshow that we hosted in the winter of 2021, our shareholders focused the discussions on, among other things, the following: (i) our corporate responsibility practices and disclosures in light of being a leader in ESG ratings and data and our path to Net-Zero and climate initiatives, (ii) human capital management, including the importance of efforts around DE&I, (iii) talent management and executive and director succession planning and (iv) Board oversight and governance, including over our corporate responsibility efforts. These meetings often included a member of our Governance Committee as well as our Head of Investor Relations, Chief Responsibility Officer, Head of Corporate Responsibility, Chief Diversity Officer, Corporate Secretary, Head of Employer Brand and Talent Pipelines and Global Head of Compensation and Benefits.
Additional information on our recent actions in response to investor feedback can be found under Corporate Responsibility on page 12 and beginning on page 45 of this Proxy Statement. Please see page 66 of this Proxy Statement for additional information on our engagement efforts specific to compensation matters.
2022 PROXY STATEMENT | 41 |
Risk Assessment Responsibilities and Processes
Our Board discusses and receives regular updates on a wide variety of matters affecting our firm. Our Board is responsible for, and committed to, the oversight of the business and affairs of our firm. In carrying out this responsibility, the Board’s role in risk oversight is consistent with the Company’s leadership structure, with management having day-to-day responsibility for identifying, evaluating and managing the Company’s risk exposure and the Board having the ultimate responsibility for overseeing risk management governance, with a focus on the Company’s most significant risks. In this role, the Board is responsible for ensuring that the risk-management processes designed and implemented by management are functioning as intended and that necessary steps are taken to assess, monitor and control key business risks.
In order to maintain effective Board oversight across the entire firm, the Board delegates to individual committees certain elements of its oversight function, as described in the example below. The Board then receives regular updates from its committees on individual categories of risk, including strategy, reputation, operations, climate change, corporate responsibility, people, technology and regulatory. Our Board’s focus on overseeing risk management also enhances our directors’ ability to provide insight and feedback to senior management.
The Board is assisted in meeting its risk oversight responsibilities by its committees as described below. The below illustration uses climate-related risks as an example of our risk oversight responsibilities and processes.
42 | MSCI | CORPORATE GOVERNANCE |
Board Oversight: The Climate Example
Board of Directors Oversees Major Risks On an ongoing basis, receives quarterly written reports on enterprise-level risks, including climate-related risks. Receives regular reports from each of the Board’s committees on their areas of risk oversight including, from time-to-time, climate-related risks. |
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Committees | ||||||
AUDIT COMMITTEE ● Receives quarterly updates from our Enterprise Risk Management Officer, which, in 2021, included a review of the governance and risks of ESG data integrity, as well as of opportunities related to reducing the Company's carbon footprint. ● Receives quarterly updates from our Chief Information Security Officer on our business continuity plans and IT disaster recovery efforts to mitigate the impact of potential disruptions, including those that could be caused by climate and extreme weather events. | COMPENSATION COMMITTEE ● Oversees the Company’s assessment of executive performance against goals, including ESG and climate related goals. ● Oversees talent management, including talent acquisition and succession planning relating to leaders in our ESG and climate business. | STRATEGY COMMITTEE ● Ensures that management factors material climate-related risks and opportunities into the Company’s strategy. ● Monitors and provides guidance on strategic objectives, including on sustainability-related mergers, partnerships and acquisition opportunities such as for those related to climate-related products and services. | ||||
GOVERNANCE COMMITTEE ●Oversees the Company’s corporate responsibility policies and initiatives, including ESG and climate initiatives. ●Receives quarterly updates from the Chief Responsibility Officer. In 2021, these focused on MSCI’s net-zero commitment, climate-related initiatives and Corporate Responsibility Operating Plan. ● Members of the Governance Committee participate in the annual Corporate Responsibility Roadshow to hear and report back to the Board on shareholders’ priorities, including climate-related risks and opportunities. ● Periodically reviews with management requests from shareholders and the investment community for climate-related disclosures. | ||||||
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Management | ||||||
●Our management team has day-to-day responsibility for identifying, assessing and managing ESG and climate-related risks and opportunities. The Company’s Enterprise Risk Oversight Committee oversees the Company’s key risk management activities to ensure that the Company is identifying, evaluating and managing risks that may have an impact on the Company’s ability to achieve its operational and strategic objectives, including ongoing assessments of climate risks. ●The Business Resiliency team assesses the severity, probability and scale of climate-related events, and implements and tests technology systems to support our business continuity plans. ● Our Crisis Management Team and Technology Service Operations Management Team oversee all aspects of our disaster and recovery response efforts, including protecting the general welfare and safety of our employees, data centers, networks, applications supporting business operations, communications systems and general technology recovery following an extreme weather incident or natural disaster. Our Internal Audit Team periodically reviews various aspects of these programs to provide independent assessment and assurance to management and the Board. |
2022 PROXY STATEMENT | 43 |
Cybersecurity and Information Security Awareness
Our Board recognizes that the security of our technology is integral to our products, our business processes and our infrastructure. The mission of our management-level Information and Technology Risk Oversight Committee (“ITROC”), led by our Chief Information Security Officer (“CISO”), is to provide oversight relating to cyber security- and technology-related risks that may present significant impact to our operations, clients, reputation and financial position. Our IT risk program also includes an incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident, on-going internal and external assessments of our IT controls and security awareness training for employees.
On a quarterly basis, the Audit Committee is updated on the Company’s IT risk program by our CISO, including an overview of risks and trends, that is also made available to the full Board. In addition, the Audit Committee receives updates about the results of assessments conducted by outside advisors who provide independent assessments of our IT risk program and our response preparedness. The Chair of the Audit Committee informs the Board of any key updates during his quarterly reports to the Board.
Enterprise Risk Awareness
Our approach to overseeing new and emerging risks across MSCI is informed by our management-level Enterprise Risk Oversight Committee (“EROC”), chaired by our Chief Financial Officer. The EROC provides oversight of MSCI’s risk management activities to ensure that we are identifying, evaluating and managing risks that may have an adverse impact on our ability to achieve operational and strategic objectives. The enterprise risk management program currently evaluates risk in numerous areas within MSCI, including technology infrastructure; clients; people, including talent management and DE&I; financial resilience; legal, regulatory and compliance; and corporate responsibility, including areas such as climate risk. Within each category, we seek to identify and mitigate risks, enable improved decision-making and prioritization, and promote monitoring and reporting across functions within the Company. While the EROC captures and monitors risk management activities regarding our IT security and technology infrastructure, primary reporting and evaluation of risks relating to our technology infrastructure sits with the ITROC, as detailed above.
On a quarterly basis, the Audit Committee is updated on MSCI’s enterprise risk management program by our Enterprise Risk Management Officer, including an overview of risks and trends, that is also made available to the full Board. Quarterly presentations to the Audit Committee include more detailed discussions of emerging topics and trends. In 2021, these discussions included topics such as ESG and climate-related risks and opportunities as well as MSCI’s regulatory environment. The Chair of the Audit Committee informs the Board of any key updates during his quarterly reports to the Board.
Privacy Awareness
Integrated with our IT security program and our enterprise risk program is our global privacy program. Our privacy program is led by our Chief Privacy Officer and the members of the MSCI Privacy Office, and it reports into our CISO. Our Privacy Steering Committee meets on a quarterly basis to review key risks and trends, progress on key initiatives, focus topics and regulatory developments. The Privacy Steering Committee is an essential component of our efforts to safeguard the processing of personal, sensitive and confidential data at MSCI and provides cross-functional oversight of our privacy program.
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Management Succession Planning
One of the Board’s principal responsibilities is to ensure appropriate succession plans are in place for our senior management and review our executive talent including our potential leadership bench. The Compensation Committee oversees the process for succession planning for senior management positions. Our CEO and President & COO also meet regularly with our functions to review talent plans with an aim to identify top talent, including diverse talent, who have the most potential to progress to the senior-most roles at MSCI.
In January 2022, as part of these efforts and following an extensive organizational design assessment conducted in 2021, we announced a number of organizational and senior leadership changes, and we expanded our Executive Committee to reflect MSCI’s ambition to serve as an indispensable partner to clients and the investment community. This expansion brings together and elevates more of the senior leaders who drive MSCI’s strategy and operations into MSCI’s primary leadership committee. The new members of the Executive Committee increase the representation from operating functions, in particular, Research, Technology and Data, and Private Assets. Additional information on our Executive Committee can be found on the “Our Leadership” section of our website (https://www.msci.com/who-we-are/our-leadership).
DEVELOPING OUR NEXT GENERATION OF LEADERS | ||
![]() | EXPOSURE | |
High-potential leaders are given exposure to our directors through formal presentations at Board or committee meetings, informal virtual education sessions, one-on-one meetings with individual directors and participation in other Board activities. | ||
![]() | FORMAL SUCCESSION PLANNING | |
Annual formal succession planning and talent review session held by the Compensation Committee, where all directors are invited to attend. | ||
This session includes identifying successors and reviewing succession plans for all senior management positions, including the CEO and President positions. | ||
![]() | ONGOING REVIEWS | |
The Board holds ongoing reviews of our leadership bench. |
Over the last year, the Company made the following examples of senior management appointments from its succession pools:
March 2021 | ||
● | Former Head of Japan Client Coverage promoted to Head of APAC Client Coverage and Head of APAC Analytics following predecessor’s departure | |
January 2022 | ||
● | Former Head of ESG and Climate promoted to Chief Product Officer and Head of Index | |
● | Former Head of ESG Products promoted to Head of ESG and Climate | |
● | Former Head of Americas Index Client Coverage promoted to Head of Client Coverage – Americas |
2022 PROXY STATEMENT | 45 |
As a leader in providing ESG and climate solutions to investors, we also aim to demonstrate leading corporate responsibility practices and policies that are meaningful to our various stakeholders, including our shareholders, clients, employees and local communities. This commitment includes our response to climate change and how we promote DE&I in our workforce.
Our commitment to corporate responsibility is embodied in four pillars: Better Investments for a Better World, Sustainable Operations, Social Responsibility, and Robust Governance:
46 | MSCI | CORPORATE GOVERNANCE |
Focus on Climate: Key Highlights
We take our commitment to climate seriously. As a leader in ESG and climate research and applications, MSCI is also committed to do its part to address climate change. We are focused on reducing our carbon footprint and ensuring our approach is well-aligned with our tools and solutions. Some of our recent areas of progress on our Company’s climate considerations include the ones detailed below.
![]() New Commitments & Policies | ![]() New Actions | ![]() Additional Transparency |
● Announced our commitment to the goal of Net-Zero emissions by 2040 ● Became a founding member of the Net Zero Financial Service Provider Alliance ● Announced our commitment to support the UN SDGs and published a report demonstrating our contribution to four SDGs, using metrics aligned with our proprietary methodology to assess the SDG alignment of corporates ● Updated our Environmental Policy to include our net-zero commitment ● Updated our Supplier Code of Conduct to address emissions in MSCI’s supply chain ● Updated our Travel Policy to prioritize virtual meetings and the use of low carbon travel options | ● Developed an internal Sustainable Supplier Management Team to support our efforts to learn about our suppliers’ corporate responsibility practices and through engagement, seek to align them with our own climate commitments ● Enhanced our risk management framework to include reporting on climate considerations ● Enhanced our corporate responsibility governance by creating a Corporate Responsibility Policy Committee ● Conducted Board education sessions on climate ● Brought together corporates, pensions and asset managers in roundtables to discuss climate trends and corporate responsibility practices | ● Developed easy-to-access webpage dedicated to Sustainability Reports & Policies, including: ● UN SDG Report ● Task Force on Climate-related Financial Disclosures (TCFD) Report ● Third CDP report, with an improved grade of A- ● SASB guide ● Sustainable Finance Disclosure Regulation (SFDR) Report ● Fifth UN PRI questionnaire |
2022 PROXY STATEMENT | 47 |
Corporate Responsibility Governance
We ensure the robustness of oversight over our corporate responsibility efforts through our governance process. Through a well-established framework and cross-functional committee structure, with leaders from across the organization, MSCI incorporates corporate responsibility into its core strategy—reflecting our belief that sustainable practices are essential to long-term growth. In line with this focus, the Governance Committee oversees the company’s significant corporate responsibility matters, including corporate responsibility priorities and disclosure, with management having day-to-day responsibility over these efforts.
In 2021, we enhanced our corporate responsibility governance by separating our CRC, which reviews corporate responsibility issues and policy proposals, from the newly created CRPC, a smaller group of Executive Committee members who review strategically significant proposals regarding corporate responsibility policies, actions and disclosures.
Second, we expanded the CRC, which reports to the CRPC. The CRC meets on a monthly basis and reviews corporate responsibility trends, shares updates on the implementation of MSCI’s Corporate Responsibility Operating Plan and reviews MSCI’s corporate responsibility reports. The CRC also considers corporate responsibility initiatives and makes recommendations to the CRPC on the most strategic ones.
To underscore our commitment to our corporate responsibility efforts, in 2022, our Chief Responsibility Officer relinquished her role as Head of Index to become fully dedicated to corporate responsibility.
Our Corporate Responsibility Oversight Framework
Our Chief Responsibility Officer leads the CRPC, where she presents to MSCI’s key decision makers and/or internal experts on corporate responsibility-related actions that may ultimately be recommended to our CEO, President & COO and/or the Board. As a member of the Executive Committee, she also brings corporate responsibility considerations to senior leadership discussions on MSCI’s business strategy and operations. At the Board level, she provides written updates to the Governance Committee in advance of each quarterly meeting on MSCI’s corporate responsibility efforts. The full Board also has access to these updates. In addition, at least twice per year, she presents to the Governance Committee on key initiatives and management’s performance against our Corporate Responsibility Operating Plan. In 2021, the Corporate Responsibility Operating Plan was largely informed by feedback from our stakeholders to increase our transparency in areas such as climate and DE&I. Key developments are shared with the full Board during the Governance Committee’s quarterly report to the Board.
The Head of Corporate Responsibility was appointed in 2021 and reports to the Chief Responsibility Officer. She leads our officer-level CRC in its efforts to broaden the scope of perspectives that review the Company’s corporate responsibility actions.
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The Board’s Oversight of Corporate Responsibility
Board of Directors | |||||||||
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Chairman/CEO Henry Fernandez | ![]() | Oversees Board Process | Meets Independently with Board | ![]() | President & COO Baer Pettit | ||||
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Governance and Corporate Responsibility Committee | Compensation, Talent and Culture Committee | Audit & Risk Committee | Strategy & Finance Committee | ||||||
● Chief Responsibility Officer* provides quarterly updates ● Corporate Secretary+ manages annual review of charters and Board policies ● Head of Compliance provides annual update ● External Counsel leads annual governance review ● Governance Committee oversees shareholder engagement on corporate responsibility matters, including participation by its members in annual Corporate Responsibility Roadshow | ● Chief Human Resources Officer* oversees quarterly meetings and succession and progression planning updates ● Chief Diversity Officer+ provides updates on DE&I initiatives and strategic enhancements ● Head of Compensation & Benefits incorporates the Compensation Committee’s recommendations into executive compensation program ● Compensation Consultant advises Compensation Committee on risk assessment and peer and best practices | ● CFO* and Global Controller+ oversee quarterly meetings ● Independent Auditor oversees integrity in financial reporting ● Internal Auditor reports to Audit Committee and provides quarterly updates on audit activities, findings and assurance ● Enterprise Risk Management Officer and Chief Information Security Officer+ provide quarterly reports | ● CFO* oversees quarterly meetings ● CFO* partners with Strategy Committee to develop agenda for annual strategy meeting ● Heads of Product Lines*+ present strategy at annual strategy meeting | ||||||
* | Member of Corporate Responsibility Policy Committee |
+ | Member of or function represented on Corporate Responsibility Committee |
Risk Oversight of Corporate Responsibility
MSCI’s EROC is also integrated into our corporate responsibility oversight framework. The EROC oversees MSCI’s risk-management governance to ensure that MSCI has an effective process designed to identify, evaluate and manage risks that may have an adverse impact on MSCI’s ability to achieve its operational and strategic objectives. Climate-related risks are integrated into MSCI risk reporting, including transition and physical climate risks. The Audit Committee receives a quarterly update from the Enterprise Risk Management Officer on the work of the EROC, which includes reporting on climate-related risks.
Additional information on our corporate responsibility efforts, including our published sustainability reports, can be found on our Corporate Responsibility website (https://www.msci.com/who-we-are/corporate-responsibility).
We recognize that our people power our business and that our diverse workforce and inclusive work environment are critical to our success. Our Compensation Committee’s oversight responsibilities include our policies relating to DE&I, corporate culture and employee engagement. The Compensation Committee at least annually receives updates on the Company’s progress on DE&I initiatives, including key performance metrics, and the Chief Diversity Officer regularly presents to the Compensation Committee. The Compensation Committee also annually reviews MSCI’s Global Human Rights Policy and related disclosures.
2022 PROXY STATEMENT | 49 |
Learning and Development | Diversity, Equity and Inclusion | Health and Safety and Future of Work |
● We are committed to creating a performance and growth culture of high employee engagement, where every employee takes personal ownership of their performance, career and professional growth ● We offer tools and workshops to help employees better understand how their work aligns with our overall strategy, seek and receive feedback and coaching, successfully deliver on goals and plan and develop their careers. Recent updates include: ● 210%+(1) increase in our investment in learning and development since 2015 ● 5x(1) growth in the number of participants in our learning and development programs from 2017 to 2021 ● We support employee learning by sponsoring and reimbursing employees for certain certifications and membership dues, ongoing education and relevant industry conferences and seminars ● Additional examples of programs offered include: ● Virtual training programs to build remote capabilities ● Mystery Coffee: connects employees across the globe for informal networking opportunities ● Career Success at MSCI: enables employees to plan, manage and take actions aligned with their career aspirations ● Accelerated Leadership Development: provides one-on-one coaching, leadership skills development, networking and applied learning ● Women’s Sponsorship/Mentorship program for high performing women ● Integration programs for new colleagues from Real Capital Analytics | ● Our people are empowered to maximize their potential in an environment where all individuals are respected and encouraged to bring their authentic selves to work ● In May 2021, we appointed our first Chief Diversity Officer ● Continued sponsorship of existing ERGs, with three new ERGs launched in 2021: Asian Support Network, All Abilities Network and Hola! MSCI ● Linked 10% of target annual cash incentive under AIP program to DE&I Goals for all Managing Directors, and created an Executive Accountability Framework to establish the philosophy and process for assessing progress against DE&I Goals ● Executed 4th Annual Global DE&I Summit, focusing on leadership development and strategic planning ● Continued partnerships with multiple external resources for our outreach and engagement with diverse talent, including #10,000 Black Interns and Rare Recruitment ● Launched an inclusive internship program in New York, London and Chicago for undergraduates and masters students, sourced from partnership organizations and key universities globally ● An employee engagement check-in survey in December 2021 showed that 91% of respondents are proud to work at MSCI and 87% feel they can bring their authentic selves to work(1) | ● We have a long-standing commitment to the health, safety and well-being of our employees ● Early in the course of the COVID-19 pandemic, we prioritized the well-being of our global workforce by having the vast majority of our employees work from home ● At the onset of the pandemic, we engaged a firm of global medical and safety experts to provide additional information and guidance to all of our offices globally ● We have increased communications about employee assistance programs that provide mental health and emotional well-being support, as well as resources to help manage stress and care for individuals and their families ● In January 2022, we transitioned to our Future of Work at MSCI, which introduced increased flexibility to how and where employees work, reimagined our use of our offices, and modernized technology to enhance MSCI’s interactions with clients and employees ● To protect the health and safety of our employees, we implemented a global vaccination policy requiring employees and visitors to be fully vaccinated prior to entering an MSCI office or participating in an MSCI-sponsored function. ● Our Global Human Rights Policy reflects our commitment to a safe, inclusive and diverse workplace, and is annually reviewed by the Compensation Committee |
(1) | On September 13, 2021, we completed our acquisition of Real Capital Analytics, a provider of data and analytics for the properties and transactions that drive the global commercial real estate capital markets. This information does not reflect or include these new employees from Real Capital Analytics. |
TOTAL EMPLOYEES: GENDER(1)(2) | U.S. EMPLOYEES: RACE/ETHNICITY(1)(3) | |
![]() | ![]() |
(1) | Data as of December 31, 2021. |
(2) | 3% of global employees have not identified gender and are not included in the data calculations. |
(3) | 11% of U.S. employees have not identified race/ethnicity and are not included in the data calculations. |
50 | MSCI | CORPORATE GOVERNANCE |
Compensation, Talent and Culture Governance
The Compensation Committee operates under a written charter adopted by the Board. To provide more clarity and transparency to investors and stakeholders on Board committee-level oversight of talent management, in 2021, the Board changed the name of its Compensation & Talent Management Committee to “Compensation, Talent and Culture Committee.” This corresponds with changes to the Compensation Committee’s charter in 2021 to reflect more direct oversight of talent management, including talent acquisition, development and career progression, as well as the Company’s policies relating to DE&I, corporate culture and employee engagement. As noted above in the description of the Compensation Committee’s responsibilities, the Compensation Committee is responsible for reviewing and approving annually all compensation awarded to the Company’s executive officers,Executives, including the CEO and theour other NEOs presented in the Summary Compensation Table on page 58 of this Proxy Statement. Information on the Compensation Committee’s processes, procedures and analysis of executive officer compensation for 2017 is provided in the “Compensation Discussion and Analysis” section included herein.
26 MSCI INC.2018 PROXY STATEMENT
CORPORATE GOVERNANCE
NEOs.
The Compensation Committee activelyalso regularly engages with our CEO, President & COO, Chief Human Resources Officer, Chief Diversity Officer and other members of senior leadership on a broad range of human capital management topics. The Board regularly receives reports from the Compensation Committee on human capital management topics throughout the year. The Compensation Committee annually reviews the Company’s talent management strategies and programs with respect to senior levels in its dutiesthe organization, including the Company’s DE&I strategies and follows procedures intended to ensure good compensation governance.programs and key performance metrics, and periodically reviews open senior management roles, future talent needs, the Company’s corporate culture and learning and development programs, as well as the results of the Company’s employee engagement survey. See page 2235 of this Proxy Statement for additional information on the Compensation Committee’s responsibilities.
The principal compensation plans and arrangements applicable to our executive officersNEOs are described in the “Compensation Discussion and Analysis”Matters” section of this Proxy Statement and the executive compensation tables included herein.therein. The Compensation Committee may delegate the administration of these plans and arrangements, as appropriate, including to one or more officers of the Company, subcommittees or to the Chair of the Compensation Committee, in each case, when it deems doing so to be appropriate, and in the best interests of the Company and consistent with applicable law and NYSE requirements.
The Compensation Committee has the authority to retain and terminate any compensation consultant assisting the Compensation Committee in the evaluation of CEO or other executive officer compensation, including authority to approve such compensation consultant’s fees and other retention terms.compensation. As further described in the “Compensation Discussion and Analysis” section included herein, during 2017,2021, the Compensation Committee retainedcontinued to retain Semler Brossy Consulting Group, LLC (“Semler Brossy”) as its own externalindependent compensation consultant to review CEO and other executive officer compensation. All of the services provided by Semler Brossy to the Compensation Committee during 20172021 were to provide advice or recommendations on the amount or form of executive officer and director compensation, and Semler Brossy did not provide any additional services to the Company during 2017.2021. The Compensation Committee has considered, among other things, the factors delineated in Rule10C-1 under the Exchange Act (“Rule 10C-1”), including the NYSE listing rules implementing Rule10C-1 and Semler Brossy’s conflict of interest policies, and determined that the engagement of Semler Brossy does not raise any conflict of interest or other factors that compromise the independence of its relationship with the Compensation Committee. In developing its views on compensation matters and determining the compensation awarded to our CEO and other executive officers, the Human Resources Departmenthuman resources department provides data and analyses to aid the Compensation Committee in its decisions. The CEO also makes recommendations on compensation for executive officers other than himself and the Compensation Committee takes these recommendations into account in reaching its compensation decisions. From time to time, the Compensation Committee may obtain input from external legal counsel, including Davis Polk & Wardwell LLP (“Davis Polk”), on compensation award documentation and other compensation-related practices, which in 20172021 was communicated to the Compensation Committee via management, the Legal Departmentlegal department or the Human Resources Department.human resources department. In light of this relationship, the Compensation Committee has considered, among other things, the factors delineated in Rule10C-1, under the Exchange Act, including the NYSE listing rules implementing Rule10C-1 and Davis Polk’s conflict of interest policies.
2022 PROXY STATEMENT | 51 |
Corporate Governance Documents
MSCI has a corporate governance webpage that can be found under the “Corporate Governance” link on our website’s Investor Relations homepage (http://ir.msci.com).
Our Corporate Governance Policies (including our Director Independence Standards), Code of Ethics and Business Conduct (the “Code of Ethics”) and Board committee charters are available electronically, without charge, on or through our website. To access these documents, click on the “Corporate Governance” link found on our website’s Investor Relations homepage (http://ir.msci.com). These documents are also available, without charge, to any shareholder who requests them by writing to us at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007 or via email atinvestor.relations@msci.com.
Our Code of Ethics applies to our directors, executive officers and employees. If we make any substantive amendment to, or grant a waiver from, a provision of the Code of Ethics for our CEO, CFO, principal accounting officer or controller or persons performing similar functions, we will satisfy the applicable SEC disclosure requirement by promptly disclosing the nature of the amendment or waiver on our website’s Investor Relations homepage (http://ir.msci.com). In 2017, as part of its annual review, the Board amended the Code of Ethics to, among other things, (1) add sections on anti-corruption, protection of Company systems and assets and communications protected by law, (2) expand language on the purpose of the Code of Ethics, cooperation in investigations and diversity and inclusion, (3) add examples of conflicts of interest and (4) update language to conform to changes made to the Company’s Code of Conduct. Information contained on our website is not incorporated by reference into this Proxy Statement or any other report we file with the SEC.
MSCI INC.2018 PROXY STATEMENT 27
DirectorCompensation and Stock Ownership Guidelines
CURRENT DIRECTOR COMPENSATIONDirector Compensation
In 2017,Director Compensation Best Practices
Robust Director Stock Ownership Guidelines | Each non-employee director is required to own a target number of shares of stock of the Company equal to the sum of the “net shares” resulting from the vesting of the RSUs granted to such director for each of the last five years. | |
Anti-Hedging and Anti-Pledging Policy | We prohibit all directors and employees, including all NEOs, from hedging or pledging the Company’s common stock or engaging in short sales, purchases or sales of options, puts or calls, as well as derivatives such as swaps, forwards or futures and trading on a short-term basis in the Company’s common stock. | |
Emphasis on Equity Compensation | The most significant portion of non-employee director compensation is the annual RSU equity award for service on the Board. |
Director Compensation Program
The Compensation Committee reviews non-employee director was entitled to receive an annual cash retainer of $75,000. In additioncompensation every two years and recommends changes, when appropriate, to the annual retainer,non-employee directors were also entitledBoard. The Compensation Committee is aided in its review by its external independent compensation consultant, Semler Brossy. The Compensation Committee takes into account peer benchmarking and broader general industry practices to the following cash retainers for serving as chairs and/ornon-chair members of the Board’s standing committees. Directors do not receive meeting fees and employee directors do not receive any separate compensation for their Board activities.
establish non-employee director compensation.
DIRECTOR FEES | COMMITTEE MEMBERSHIP FEES | |||
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* | Based on the closing price of our common stock as reported by the NYSE on the trading day prior to grant. |
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| market practice. |
Eachnon-employee director was also entitled to receive an annual equity award payable in RSUs having an aggregate fair market value of $140,000 fornon-employee directors and $165,000 for the Lead Director based on the closing price of our common stock as reported by the NYSE on the date prior to grant.
Directors may elect under the terms of the MSCI Inc. 2016Non-Employee Directors Compensation Plan (the “Directors Plan”) to receive their cash retainer in the form of shares of our common stock. Under the Directors Plan,non-employee directors are subject to annual limits on their cash and equity compensation, which were approved by our shareholders at our 2016 annual meeting of shareholders, as follows:non-employee directors may not receive in any calendar year (i) options, restricted stock, RSUs and other stock-based awards with a grant date fair value of more than $1,000,000 (as determined in accordance with
52 | MSCI | DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES |
applicable accounting standards) and (ii) retainers and other cash-based awards in excess of $1,000,000. These caps cannot be increased without the approval of our shareholders.
RSUs granted tonon-employee directors are granted on May 1st of each year and vest on the first anniversary of the grant date. Cash retainers and RSU awards are prorated when a director joins the Board and/or a committee at any time other than May 1st. RSUs not granted on or after May 1st vest on the next May 1st to occur following the grant date. For example, if a director joins the Board on February 1, 2018,2022, his or her prorated RSUs will vest on May 1, 2018.2022. If a director joins the Board on May 31, 2018,2022, his or her prorated RSUs will vest on May 1, 2019.2023.
RSUs are recognized as an expense in the Company’s financial statements for financial reporting purposes with respect to 20172021 in accordance with FASB ASC Subtopic718-10.
Holders of these RSUs are entitled to participate in dividend equivalent payments, and such payments may be settled in cash, shares of our common stock, or a combination thereof, to be decided by the Company in its sole discretion. Prior to the conversion to shares, RSU holders do not have any rights as an MSCI shareholder with respect to such RSUs, including the right to vote the underlying shares. The RSUs are generallynon-transferable; however, our Board may, in its discretion, specify circumstances under which an award may become immediately transferable and nonforfeitable or under which the award will be forfeited. The RSUs vest and convert to shares immediately upon termination of service for reasons of death, disability or a change in control. If service as a director terminates for any other reason, all unvested RSUs will be cancelled and forfeited unless determined otherwise by the Board or the Compensation Committee.
Non-employee directors are reimbursed for their expenses incurred in connection with attending Board meetings.meetings and educational sessions.
Director Deferral Plan
28 MSCI INC.2018 PROXY STATEMENT
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
CHANGESTO DIRECTOR COMPENSATION
The Board reviews director compensation every two years, and director compensation has not been increased since 2014. In connection with its review of director compensation in early 2018, the Compensation Committee considered peer group data (the same peer group used for executive pay level comparisons and described on page 55 of this Proxy Statement) and general industry data, which indicated that MSCI’s current director compensation levels were below the 2016 peer group median. With the input of Semler Brossy and with the recommendation of the Compensation Committee, the Board adopted the following increases (effective May 1, 2018) to align more closely with the median director compensation, as well as the anticipated market movement before the next review of director compensation scheduled for early 2020. The increase is intended to allow MSCI director compensation to remain around the median of the peer group through the 2020 compensation review, and maintains total director compensation below the 75th percentile of such peer group.
Retainer |
Increase |
Rationale | ||||||||
Committee Chair | ||||||||||
Audit Committee | $ | 30,000 | $ | 5,000 | • Increase maintains competitiveness of each retainer and the retainer differentiation among the committees
• Retainers for Audit Committee and Nominating Committee Chairs below the peer group median | |||||
Compensation & Talent Management Committee | $ | 25,000 | $ | 5,000 | ||||||
Strategy and Finance Committee | $ | 25,000 | $ | 5,000 | ||||||
Nominating and Corporate Governance Committee | $ | 20,000 | $ | 5,000 | ||||||
CommitteeNon-Chair Member | ||||||||||
Audit Committee | $ | 10,000 | – | • Committee membership retainers are well aligned with peer levels | ||||||
Compensation & Talent Management Committee | $ | 10,000 | – | |||||||
Strategy and Finance Committee | $ | 10,000 | – | |||||||
Nominating and Corporate Governance Committee
| $
| 10,000
|
|
| –
|
| ||||
Annual Compensation | ||||||||||
Annual Cash Retainer | $ | 75,000 | – | • Increase in equity retainer aligns with peer median
• Equity award-focused compensation approach that aligns with the target pay mix for the Executive Committee and executive officers
• Increase to Lead Director compensation to reflect the increased responsibilities
• The premium paid to Lead Director is below S&P 500 median and peer group
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Annual RSUs(non-Lead Director) | $ | 160,000 | $ | 20,000 | ||||||
Annual RSUs (Lead Director) | $ | 210,000 | $ | 45,000 | ||||||
On August 2, 2011, the Board adoptedUnder the MSCI Inc. Independent Directors Deferral Plan and subsequently amended and restated the plan in 2016 as the MSCI Inc.Non-Employee Directors Deferral Plan (the “Deferral Plan”). The Deferral Plan permits, our directors are permitted to defer receipt of shares of our common stock payable in lieu of cash retainers and/or upon conversion of RSUs granted to the director following the year for which an election has been submitted;provided that an election made by a director within 30 days after the director becomes eligible to receive a cash retainer or RSUs shall apply to any common stock payable in lieu of such a cash retainer and/or upon conversion of such RSUs granted to the director following the date on which the director makes the election. Receipt of shares of our common stock may be deferred until a future date specified by the director, a separation from service (as defined by Treasury regulations), or the earlier of the two. While the Deferral Plan allows for it, the Board has not yet implemented a process for the deferral of cash payments.
MSCI INC.2018 PROXY STATEMENT 292021 Non-Employee Director Compensation
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
2017 NON-EMPLOYEE DIRECTOR COMPENSATION
Name
| Fees Earned ($)
| Stock ($)
| All Other ($)
| Total ($)
| ||||||||||||||||
Robert G. Ashe(8)
|
| 109,834
|
|
| 139,946
|
|
| 1,964
|
|
| 251,744
|
| ||||||||
Benjamin F. duPont(9)
|
| 94,931
|
|
| 139,946
|
|
| 4,043
|
|
| 238,920
|
| ||||||||
Wayne Edmunds(10)
|
| 97,438
|
|
| 139,946
|
|
| 1,964
|
|
| 239,348
|
| ||||||||
Alice W. Handy(11)
|
| 84,932
|
|
| 139,946
|
|
| 32,472
|
|
| 257,350
|
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Catherine R. Kinney(12)
|
| 89,963
|
|
| 139,946
|
|
| 23,028
|
|
| 252,937
|
| ||||||||
Wendy E. Lane(13)
|
| 85,000
|
|
| 139,946
|
|
| 1,964
|
|
| 226,910
|
| ||||||||
Jacques P. Perold(14)
|
| 97,630
|
|
| 160,275
|
|
| 1,451
|
|
| 259,356
|
| ||||||||
Linda H. Riefler(15)
|
| 97,438
|
|
| 139,946
|
|
| 1,964
|
|
| 239,348
|
| ||||||||
George W. Siguler(16)
|
| 85,000
|
|
| 139,946
|
|
| 1,964
|
|
| 226,910
|
| ||||||||
Marcus L. Smith(17)
|
| 36,986
|
|
| 69,025
|
|
| 223
|
|
| 106,234
|
| ||||||||
Patrick Tierney(18)
|
| 85,000
|
|
| 139,946
|
|
| 1,964
|
|
| 226,910
|
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Rodolphe M. Vallee(19)
|
| 100,000
|
|
| 164,926
|
|
| 2,315
|
|
| 267,241
|
|
Name | Fees Earned or Paid in Cash(1)(2) ($) | Stock Awards(3)(4) ($) | All Other Compensation(5) ($) | Total ($) | ||||
Robert G. Ashe | 114,642 | 214,710 | 1,777 | 331,129 | ||||
Benjamin F. duPont(6) | — | — | 9,159 | 9,159 | ||||
Wayne Edmunds | 120,000 | 164,676 | 1,363 | 286,039 | ||||
Catherine R. Kinney | 89,867 | 164,676 | 75,468 | 330,011 | ||||
Jacques P. Perold | 110,000 | 164,676 | 1,363 | 276,039 | ||||
Sandy C. Rattray | 100,000 | 164,676 | 1,363 | 266,039 | ||||
Linda H. Riefler | 115,000 | 164,676 | 1,363 | 281,039 | ||||
Marcus L. Smith | 100,000 | 164,676 | 1,363 | 266,039 | ||||
Rajat Taneja(7) | 82,231 | 150,738 | 1,040 | 234,009 | ||||
Paula Volent | 99,583 | 164,676 | 1,363 | 265,622 |
(1) | Pursuant to MSCI’s Third Amended and Restated Articles of Incorporation, directors hold office for a term expiring at the next annual meeting of shareholders. The Board term beginning on April |
2022 PROXY STATEMENT | 53 |
December fiscal year. Amounts included in the table above represent cash earned or paid, or stock awards granted, as applicable, during the year ended December 31, |
(2) | Cash amounts in this column include the annual retainers and committee |
Cash | Stock | ||||
Mr. Ashe | — | $ | 114,641.72 (236 shares) | ||
Ms. Kinney | — | $ | 89,867.45 (185 shares) | ||
Mr. Taneja | — | $ | 82,230.66 (178 shares) | ||
Ms. Volent | — | $ | 99,582.85 (205 shares) |
(3) | Represents the aggregate grant date fair value of RSUs granted in |
30 MSCI INC.2018 PROXY STATEMENT
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
As of December 31, |
Cash amounts in this column include dividend equivalents paid during the year ended December 31, |
Name | Shares | Cash Received for Fractional Shares | |||||
Mr. duPont | $ | 8,242.33 (19 shares) | $ | 916.43 | |||
Ms. Kinney | $ | 72,951.85 (137 shares) | $ | 1,153.87 | |||
Ms. Riefler | — | $ | 969.54 | ||||
Mr. Taneja | — | $ | 1,040.00 |
Mr. | |
(7) | Mr. |
|
MSCI INC.2018 PROXY STATEMENT 31
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINESNon-Employee Director Stock Ownership Guidelines
Under the Company’s stock ownership guidelines fornon-employee directors, commencing on the date of ourApril 28, 2016, annual meeting of shareholders, eachnon-employee director has been required to own a target number of shares of stock of the Company equal to the sum of the “net shares” resulting from the vesting of the RSUs granted to such director for each of the last five years, with such aggregate share ownership to be achieved within five years of initially being elected or appointed to the Board and maintained thereafter. “Net shares”Shares” means the number of shares that would remain if the shares resulting fromunderlying the vesting of the RSUsequity awards are sold or withheld by the Company to (i) pay the
54 | MSCI | DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES |
exercise price of a stock option, (ii) satisfy any tax withholding obligations (assuming a tax rate of 40%50%) upon either (i) the conversion of such RSUs into shares or (ii) the cessation of(iii) satisfy any tax deferral period with respect to such RSUs.other applicable transaction costs.
Shares that count towards satisfaction of the target level of stock ownership under thesethe stock ownership guidelines for non-employee directors consist of the following:
(1) | Shares beneficially owned individually, either directly or indirectly (including any shares beneficially owned as a result of an election to receive a retainer (or any portion thereof) |
(2) | Shares beneficially owned jointly with, or separately by, immediate family members residing in the same household, either directly or indirectly; |
(3) | Shares underlying vested and unvested RSUs granted under the |
(4) | Shares for which receipt has been deferred (including any shares held through the Deferral Plan or any other deferred compensation plan maintained by the Company). |
As of the date of this Proxy Statement, all of ournon-employee directors are in compliance with the Company’s stock ownership guidelines.
32 MSCI INC.2018 PROXY STATEMENT
2022 PROXY STATEMENT | 55 |
BeneficialOwnership of Common StockProposal No. 2
STOCK OWNERSHIPOF EXECUTIVE OFFICERSAND DIRECTORS
We require members of ourAdvisory Vote to Approve Executive Committee (currently comprised of 14 senior managers, including all of our NEOs) and our directors to comply with our stock ownership guidelines to further align their interests with the interests of our shareholders. As of the date of this Proxy Statement, all of the members of our Executive Committee and our directors are in compliance with the applicable stock ownership guidelines. See “Compensation Matters—Compensation Discussion and Analysis—Stock Ownership Guidelines” below and “Director Compensation and Stock OwnershipGuidelines—Non-Employee(Say-on-Pay) Director Stock Ownership Guidelines” above for additional information regarding our ownership guidelines for the members of our Executive Committee and our directors, respectively.
The following table sets forth the beneficial ownership of our common stock by each of our NEOs and directors, and by all of our directors and executive officers as of March 14, 2018, as a group. The address for each of our executive officers and directors is 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007. Percentage of share ownership amounts are based on 89,876,918 shares of our common stock outstanding as of March 14, 2018.
Shares(1) | Right to Acquire(2) | Beneficial Ownership Total(3) | Percent of Class(4) | |||||||||||||||||
NAMED EXECUTIVE OFFICERS | ||||||||||||||||||||
Henry A. Fernandez | 1,587,493 | (5) | 49,774 | 1,637,267 | 1.82 | % | ||||||||||||||
Kathleen A. Winters | 13,375 | 3,950 | 17,325 | – | % | |||||||||||||||
C.D. Baer Pettit | 148,691 | – | 148,691 | – | % | |||||||||||||||
Laurent Seyer | 8,145 | – | 8,145 | – | % | |||||||||||||||
Scott A. Crum | 8,445 | – | 8,445 | – | % | |||||||||||||||
DIRECTORS | ||||||||||||||||||||
Robert G. Ashe | 10,464 | 1,395 | 11,859 | – | % | |||||||||||||||
Benjamin F. duPont | 21,800 | – | 21,800 | – | % | |||||||||||||||
Wayne Edmunds | 4,420 | 1,395 | 5,815 | – | % | |||||||||||||||
Alice W. Handy | 30,768 | – | 30,768 | – | % | |||||||||||||||
Catherine R. Kinney | 20,614 | – | 20,614 | – | % | |||||||||||||||
Wendy E. Lane | 4,420 | 1,395 | 5,815 | – | % | |||||||||||||||
Jacques P. Perold | 213 | 1,395 | 1,608 | – | % | |||||||||||||||
Linda H. Riefler | 14,870 | 1,395 | 16,265 | – | % | |||||||||||||||
George W. Siguler | 27,083 | 1,395 | 28,478 | – | % | |||||||||||||||
Marcus L. Smith(6) | – | 587 | 587 | – | % | |||||||||||||||
Patrick Tierney(7) | 13,242 | 1,395 | 14,637 | – | % | |||||||||||||||
Rodolphe M. Vallee(8) | 24,912 | 1,644 | 26,556 | – | % | |||||||||||||||
ALL EXECUTIVE OFFICERS AND DIRECTORS AS OF MARCH 14, 2018 AS A GROUP (22 PERSONS) | 2,053,968 | 65,720 | 2,119,688 | 2.36 | % |
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MSCI INC.2018 PROXY STATEMENT 33
BENEFICIAL OWNERSHIP OF COMMON STOCK
The Dodd-Frank Act enables MSCI’s shareholders to |
For an overview of the We are asking for shareholder approval of This vote is advisory and therefore not binding on MSCI, the Compensation Committee or the Board. The Board and the Compensation Committee value the opinions of MSCI’s shareholders. To the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. MSCI currently conducts annual advisory votes on executive compensation. VOTE REQUIRED AND RECOMMENDATION The affirmative vote of a majority of the |
treated as votes cast.
STOCK OWNERSHIPOF PRINCIPAL SHAREHOLDERS
The following table contains information regarding the only persons we know of that beneficially own more than 5% of our common stock. Percentage of class amounts are based on 89,876,918 shares of our common stock outstanding as of March 14, 2018.
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Proxies solicited by the Board will be voted “FOR”this approval unless otherwise instructed. | |||||||
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34 MSCI INC.2018 PROXY STATEMENT
BENEFICIAL OWNERSHIP OF COMMON STOCK
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that all required reports during 2017 have been timely filed under the SEC’s rules for reporting transactions by executive officers and directors in our common stock.
MSCI INC.2018 PROXY STATEMENT 35
Table of Contents
2022 PROXY STATEMENT | 57 |
36 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
COMPENSATION DISCUSSIONAND ANALYSISCompensation Discussion and Analysis
This Compensation Discussion and Analysis (referred to as the “CD&A”) section summarizes our general philosophy with regard to the compensation of our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”) and Treasurer, and our three next most highly paid executive officers in 2021 (collectively referred to as “named executive officers” or “NEOs”). The CD&A provides context for the executive compensation disclosures presented below in both tabular and narrative form. Under its charter, the Compensation & Talent Management Committee of the Board (referred to as the “Committee” in this Compensation Matters section) reviews the Company’s compensation strategy and reviews and approves executive officer compensation as well as the Company’s compensation and benefits policiesprogram generally. The Compensation Committee approved the compensation structure and amounts for each of our NEOs for 2017.
Our NEOs for 2017 are:
On October 31, 2017, C.D. Baer Pettit (previously the COO) was appointedalso approved enhancements to the rolelong-term equity incentive component of President, and Laurent Seyer was appointed to serve as COO (as well as continuing to be the CCO).our executive compensation program that became effective for equity grants in 2021 following feedback we received from our shareholders.
OUR NEOS FOR 2021 ARE:
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HENRY A. FERNANDEZ | ANDREW C. WIECHMANN | C. D. BAER PETTIT | SCOTT A. CRUM | ROBERT J. GUTOWSKI | ||||
Chairman and Chief Executive Officer | Chief Financial Officer and Treasurer | President and Chief Operating Officer | Chief Human Resources Officer | General Counsel |
Our executive compensation program is designed to link pay to performance, encourage prudent decision-making and risk management, and create a balanced focus on short-term and long-term performance andthat fuels shareholder value creation. Our overriding objective is to create long-term sustainable value for our shareholders. To accomplish this objective, we need to (i) create broad and innovative research-driven content, (ii) expand our client base and deepen existing client relationships, (iii) develop flexible and scalable technology, (iv) expand value-added service offerings and (v) enter into strategic relationships and acquisitions. In the dynamic and competitive environment in which we operate, it is imperative that we maintain a responsible executive compensation program that encourages and rewards our leaders for achieving theseshort-term and long-term results.
OurThe following table sets forth the key components of our target-based compensation program includes a fixed component (base salary) and variablein effect in 2021.
PHILOSOPHY
Each of the three components (annual cash bonus and long-term incentives), emphasizes achievement against specific goals/targets, and recognizes that each component serveshas a different purpose. Our target-basedThe sum of the base salary, target annual cash incentive structure is designed to emphasize pay for performance and balance short-termtarget equity incentive creates a target total compensation. Actual cash incentive and long-term incentives by awardingequity incentive compensation based onpayouts are dependent upon the achievement of annual financial operating measures (applicablethe relevant AIP and LTIP goals tied directly to annual cash bonuses), which are focused on the annual realization of our strategic priorities, and multi-year total shareholder return (“TSR”) measures (as are applicable to long-term incentive awards granted in 2016), which are designed to encourage long-term shareholder value creation. In 2017, our CEO was not granted any long-term incentive awards and our other NEOs were only granted long-term incentive awards in the form of restricted stock units (“RSUs”) in lightperformance of the multi-year performance stock units (“PSUs”) granted to our NEOs in 2016. Company, the product/functional unit and the individual.
We believe that this target-based incentive structure fosters a culture of high performance and accountability and promotes long-term sustainable shareholder value creationinterests by closely aligning executive compensation with objectively measured Company performance and strategic goal attainment.attainment as further described below.
58 | MSCI | COMPENSATION MATTERS |
Business Strategy and Compensation
The following table sets forthdiagram below illustrates how our executive compensation program aligns the key componentsstrategic initiatives underlying our corporate mission to generate long-term shareholder value creation. The metrics included in our compensation program are aligned with our strategic initiatives and are designed to measure the achievement of our target-based compensation program.objectives that not only deliver short- and medium-term returns, but also help to build the foundation for long-term shareholder value creation.
Mission: to enable investors to build better portfolios for a better world. Strategic Pillars of Growth | ||||
enhanced content across asset classes | Lead the enablement of ESG and climate investment integration | Enhance distribution and content- enabling technology | ||
Expand solutions that empower client customization | Strengthen client relationships and grow into strategic partnerships with clients | Execute strategic relationships and acquisitions with complementary content and technology companies |
Performance-Based Compensation | ||||||
SHORT-TERM (ANNUAL INCENTIVE PLAN CASH BONUS) | LONG-TERM (EQUITY GRANTS) | |||||
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● Restricted Stock Units (for 2021, ratable vest, and for 2022, cliff-vest after a three-year service period)
● Performance Stock Options (earned based on cumulative revenue and cumulative Adjusted EPS) (new for 2022) |
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MSCI INC.2018 PROXY STATEMENT 37
COMPENSATION MATTERS
WeExecution on Strategic Priorities
Despite the economic uncertainties and social disruptions that continued throughout 2021, we delivered veryanother year of strong financial results in 2017, with achievementsresults. In fact, MSCI set a new bar for performance across variousa number of key financial and operating metrics.metrics in 2021. Our intense client-centricity has enabled us to continue to serve as a go-to partner for our clients, and we believe that our performance in 2021 demonstrates the strength of our execution and the results of our key long-term investments. We achieved record recurring sales, which drove strong subscription revenue growth. We maintained operational efficiency withthese results in 2021 while our employees continued focus on expense management and productivity initiatives in 2017. In addition, our share price increased approximately 61% during 2017 from a closing share price of $78.78 on December 30, 2016 to a closing share price of $126.54 on December 29, 2017. Our financial success in 2017 is a testament to the benefits of our enhancedgo-to-market strategy, continued innovation and product enhancement and the increasing power of our cross-product collaboration and integrated franchise. The strong execution of our strategy contributed to ourdeliver exceptional financial performance in 2017 and positions the Company for continued growth and profitability in the years ahead. The charts and tables below provide highlightsa largely remote-work environment.
2022 PROXY STATEMENT | 59 |
Strong Financial Performance
OPERATING REVENUES | DILUTED EPS / ADJUSTED EPS(1) (Unaudited) | |
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NET CASH PROVIDED BY OPERATING ACTIVITY / FREE CASH FLOW(1) (Unaudited) | NET NEW SALES(2) (Unaudited) | |
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(1) | “Adjusted EPS” and “free cash flow” are non-GAAP financial measures. See Annex B for definitions and reconciliations of all non-GAAP financial measures referenced herein. | |
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| Net New Sales is defined as gross sales (new recurring subscription sales
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For additional information about key strategic developments and milestones during 2021, please see the details under “KPI Component and DE&I Goals Component” on page 72 of this Proxy Statement.
38 MSCI INC.2018 PROXY STATEMENT
MSCI | COMPENSATION MATTERS
Key 20172021 Compensation Decisions
We believeIn 2021, despite the continuing complex and challenging operating environment resulting from the ongoing COVID-19 pandemic, our executiveemployees continued to display their resilience and dedication to our business, which was fundamental to the strong performance we achieved in 2021. The Company remained committed to nurturing and fostering an “owner-operator,” performance-based culture among employees that aligns compensation program encourages our NEOs to deliver strong financial results that positionwith the Company for future growth and success. With the help of its external independent compensation consultant, Semler Brossy, the Committee carefully considered relevant internal and external economic and business factors affecting NEO pay for 2017. The Committee considered shareholder feedback, reviewed peer compensation analyses, kept apprised of the changing legal and regulatory framework affecting pay practices and reviewed the performanceexperience.
Specifically, in 2021, we granted a significant portion of our NEOs and the Company as a whole.
As previously disclosed in our 2017 proxy statement, we granted multi-year PSU awards (“Multi-Year PSUs”) in 2016 to our NEOs in order to further align our executiveNEOs’ compensation program with our long-term strategic plan for fiscal years 2016, 2017 and 2018. Below are the key highlights of the 2016 Multi-Year PSUs.
The proportion of long-term incentive awards granted in the form of “at-risk” variable compensation under the LTIP and the AIP. The 2021 LTIP awards granted to our NEOs consist of a mix of grants of annual RSUs and PSUs to(including 3-Year PSUs and 5-Year PSUs) that varies based on the Company’s Executive Committee members (including allexecutive’s position, as further detailed on page 80 of this Proxy Statement. Consistent with our NEOs) was significantly increased—i.e.,historical practice, Mr. Fernandez received 100% of his equity compensation in the form of PSU awards, while our other NEOs receivedPSUs, with 60% to 80% of their equity compensationgranted in the form of PSUs.
● | Increased the proportion of Mr. Pettit’s 5-Year PSUs from 50% to 60% of his overall equity incentive compensation for 2021 (with the remaining 40% granted in the form of 3-Year PSUs), commensurate with Mr. Fernandez; |
● | Added a one-year post-vest mandatory holding period to the 3-Year PSUs that were granted to our NEOs in 2021, where such shares, or rights with respect to such shares, may not be transferred until the expiration of such holding period; and |
● | Under the AIP, introduced DE&I Goals for our senior leaders, linked to 10% of target annual cash bonus. |
The Compensation Committee believes that the complimentary performance metrics and (ii)associated performance cycles utilized under the AIP and LTIP collectively encourage our senior executives to manage our business with an “owner-operator” mindset that focuses on the long-term health of our business and the interests of our shareholders. Specifically, we believe that PSUs encourage a longer-term orientation to managing our business, while at the same time, the AIP serves as meaningful check and balance to ensure that our executive compensation program continues to measure and reward for performance against core financial, operational and strategic milestones in the near-term to fuel the long-term growth of shareholder value.
The key features of the 2021 RSUs and PSUs are as follows:
RSUs: | ||
● | Granted to NEOs other than the CEO and President & COO | |
● | Service-vest in three equal installments in each of 2022, 2023 and 2024 | |
● | Structure of this component was unchanged from prior years | |
● | Long-term value of underlying stock tied to share price | |
3-YEAR TSR PSUs: | ||
● | Granted to all NEOs to facilitate an “owner-operator” mindset | |
● | Cliff-vest at the end of a three-year performance cycle from February 3, 2021 to February 2, 2024, based on achievement of rigorous absolute TSR CAGR performance metrics | |
● | Reflect the right to receive between 0% and 300% of the target number of shares based on achievement of the TSR CAGR performance metric over the applicable performance period | |
● | Realize meaningful value only to the extent that shareholders also realize value | |
● | Include a one-year post-vest mandatory holding period, where such shares, or rights with respect to such shares, may not be transferred until the expiration of such holding period |
2022 PROXY STATEMENT | 61 |
5-YEAR TSR PSUs: | ||
● | Granted to all NEOs to facilitate an “owner-operator” mindset | |
● | Cliff-vest at the end of a five-year performance cycle from February 3, 2021 to February 2, 2026, based on achievement of rigorous absolute TSR CAGR performance metrics | |
● | Reflect the right to receive between 0% and 200% of the target number of shares based on achievement of the TSR CAGR performance metric over the applicable performance period | |
● | Provide “stretch” opportunity to reward for exceptional long-term value creation over a longer-than-typical performance period | |
Key 2022 Compensation Decisions
In 2021, with the help of its external independent compensation consultant, Semler Brossy, the Compensation Committee undertook a comprehensive process to research and evaluate an appropriate design for our 2022 LTIP that applies across MSCI, including to our NEOs, only receivedto ensure continued alignment of the LTIP with MSCI’s go-forward strategic objectives. As part of this review, the Compensation Committee evaluated our current LTIP design against the LTIP practices of our peers and broader industry LTIP practices. In particular, the Compensation Committee considered the following feedback from external and internal reviews, including the views of our shareholders:
● | there was strong continued support for MSCI’s “owner-operator” culture that is advanced by the LTIP; |
● | the LTIP should focus on a three-year performance period, which is more compelling because it is aligned with the timeframe of MSCI’s strategic planning; and |
● | the Company should consider complementing the absolute TSR CAGR performance metric in the PSUs with financial metrics that are directly linked to the Company’s strategic plan. In particular, feedback to the Compensation Committee was that a focus on revenue and earnings provided the strongest links to MSCI’s go-forward strategy. |
After a thorough review and evaluation process, the Compensation Committee designed the 2022 LTIP to further enhance our pay-for-performance culture by incorporating the above described feedback and reviews and positioning the 2022 LTIP to support the Company’s strategic plan and the need to incentivize continued stock price appreciation. Specifically, the Compensation Committee made the following enhancements for 2022:
● | introduced PSOs that are earned and vest based on achievement of two equally-weighted performance metrics that are directly linked to the Company’s strategic plan—cumulative revenue and cumulative adjusted EPS—each measured over a cumulative three-year performance period. The grant of the PSOs in 2022 replaced the 5-Year PSU component of our 2021 LTIP; |
● | revised the vesting structure of annual RSU grants to cliff-vest 100% at the end of a three-year service period (rather than annual ratable vesting over a three-year period); and |
● | updated the Company’s share ownership and retention guidelines to provide for even more rigorous requirements. |
As a result of these changes, and as discussed in more detail below, the Company’s 2022 LTIP consists of grants of annual RSUs, (no PSUs) in 2017,3-year PSUs and they will not receive any grants of PSUs in 2018.
The 2022 PSOs were designed such that the Company’s senior leaders, including the NEOs, will only realize value from an award if our cumulative revenue and cumulative Adjusted EPS performance over the cumulative three-year period is above threshold and if increases in our stock price are sustained above the exercise price. As a challenging multi-year absolute TSR CAGR performance metric (or a multi-year Relative TSR CAGR performance metric applicable in certain circumstances)result, the Compensation Committee believes that are intended to promote a performance culture that closely alignsthe PSOs will further align our executives’ interests with those of our shareholders.shareholders by helping to drive performance and by complementing the TSR-based performance metrics applicable to the 3-Year PSUs, which will continue to reward participants for sustained exceptional growth in the Company’s stock price.
62 | MSCI | COMPENSATION MATTERS |
The key features of the Multi-Year2022 RSUs, PSUs at or above target performance would benefitand PSOs are as follows:
RSUs: | ||
● | Granted to NEOs other than the CEO and President & COO | |
● | Cliff-vest at the end of a three-year vesting period (reflects a change from our historical practice of annual ratable vesting) | |
● | Long-term value of underlying stock tied to share price | |
3-YEAR TSR PSUs: | ||
● | Granted to all NEOs | |
● | Cliff-vest at the end of a three-year performance period from February 3, 2022 to February 2, 2025, based on achievement of rigorous absolute TSR CAGR performance metrics | |
● | Reflect the right to receive between 0% and 300% of the target number of shares based on achievement of the TSR CAGR performance metric over the applicable performance period | |
● | Realize meaningful value only to the extent that shareholders also realize value | |
● | Include one-year post-vest mandatory holding period, where such shares, or rights with respect to such shares, may not be transferred until the expiration of such holding period | |
PSOs: | ||
● | Granted to all NEOs to further facilitate an “owner-operator” mindset and focus on longer-term strategic goals | |
● | Vest upon satisfaction of both a service condition and a performance condition, with the service condition satisfied on the third anniversary of the grant date | |
● | Represent the right to exercise between 0% and 200% of the target number of shares subject to the option based on the combined level of achievement of a cumulative revenue performance goal and a cumulative adjusted EPS performance goal, each weighted at 50% and measured over a three-year performance period | |
In addition, to further promote our shareholders because such a payout would only occur“owner-operator” mindset, the Compensation Committee updated the Company’s Stock Ownership Guidelines for Executive Committee members, including our NEOs, to require that, in addition to existing requirements, our Executive Committee members must hold shares equivalent, in the event of market-leading returns, as illustrated by the chart below, which presents the share price targets for the Multi-Year PSUs at the initial measurement period (without taking into account the impact of reinvested dividends).
MSCI INC.2018 PROXY STATEMENT 39
COMPENSATION MATTERS
Multi-Year PSUs Goal Rigor
Dueaggregate, to SEC disclosure rules, we were required to report the total three-year value25% of the Multi-Year PSUs as 2016“Net Shares” from equity awards granted to them after January 1, 2022. The Compensation Committee also approved revisions to the minimum share ownership requirements to increase the thresholds applicable to members of our Executive Committee, including our NEOs, to be among the highest multiples of base salary in our peer group. See page 83 of this Proxy Statement for additional information with respect to our Executive Committee Stock Ownership Guidelines.
2022 PROXY STATEMENT | 63 |
Executive Compensation Philosophy and Goals
We evaluate our executive compensation in the Summary Compensation Table for 2016, rather than reporting the Multi-Year PSUsstructure on an annualizedannual basis for the years they cover (i.e., reportingone-third of the awards in each of 2016, 2017to ensure alignment with our compensation philosophy and 2018). The table below illustrates an alternative way to view thebusiness strategy and shareholder priorities. Our compensation paid to our current NEOs for 2017 (which reflects the Multi-Year PSUs (at their target value) on an annualized basis—i.e.,one-third of the total three-year target value) relative to the total 2017philosophy centers around maintaining a compensation that is required to be reportedprogram for our NEOs inthat is designed to promote the Summary Compensation Table for 2017 pursuant to SEC rules. The table below is not a substitute for the tablesachievement of our short-term and disclosure required by the SEC’s rules, as set forthlong-term financial and strategic goals. For additional information on our strategic initiatives, see page 58 of this Proxy Statement.
Alternative 2017 Total Compensation Table
Name and Principal Position | Annualized ($) | 2017 ($) | 2017 RSUs ($) | Annualized ($)(1) | Total 2017 Direct Compensation ($)(2) | 2017 Summary ($)(2) | ||||||||||||||||||||||||
Henry A. Fernandez, Chairman and CEO | 950,000 | 1,497,580 | 5,900,000 | 8,347,580 | 2,476,501 | |||||||||||||||||||||||||
Kathleen A. Winters, CFO | 525,000 | 974,390 | (3) | 520,000 | 780,000 | 2,799,390 | 2,471,747 | |||||||||||||||||||||||
C.D. Baer Pettit, President | 608,254 | 1,060,787 | 400,000 | 1,600,000 | 3,669,041 | 2,142,991 | ||||||||||||||||||||||||
Laurent Seyer, COO and CCO | 608,254 | 1,002,715 | 265,000 | 1,060,000 | 2,935,969 | 1,977,886 | ||||||||||||||||||||||||
Scott A. Crum, CHRO | 525,000 | 748,790 | 380,000 | 570,000 | 2,223,790 | 1,686,499 |
In addition to the principles described in the “Executive Summary” on page 57 of this Proxy Statement, our executive compensation program is designed to:
● | provide a framework to advance our strategic goals and encourage our NEOs to make a long-term commitment to the Company; |
● | base compensation determinations on the performance of the |
● | attract, retain and engage top-level talent and provide each NEO with compensation opportunities that are competitive with market practices and within our cost structure; |
● | appropriately manage compensation risk in light of our business strategy; and |
● | align the long-term interests of our senior executives with those of our shareholders by promoting actions that will allow for sustainable top- and bottom-line growth opportunities and capital returns to |
40 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
SinceOur executive compensation philosophy provides our 2017 Say-on-Pay vote,NEOs with the Compensation Committee’s actions with respectopportunity to our CEO’searn a significant portion of their compensation were solely to (i) increase his annual base salary (effective January 1, 2018) from $950,000 to $1,000,000 to align with competitive market practice (the first increase in Mr. Fernandez’s base salary since 2014)the form of variable compensation (i.e., (ii) pay Mr. Fernandez an annual cash bonus in respect of 2017 of approximately $1.5 millionincentive awards under our AIP based on actual performance against the applicable financial metrics and his individual KPIs and (iii) increase his fiscal 2018 target cash incentive to $1.4 million to be paid under the AIP to reflect competitive market practice.
The table below illustrates an alternative way to view our CEO’s year-over-year compensation in 2016 and 2017, which similar to the table above, reflects the annualized target value (i.e., one-third of the target value) of the Multi-Year PSUs for each of 2016 and 2017. As reflected in the table below, on an annualized basis, Mr. Fernandez’s 2017 compensation (which is the subject of this year’s Say-on-Pay vote) increased by only 1.4% relative to 2016. Such increase was attributable solely to the increased payout of his annual cash bonus for 2017 based on actual performance against the applicable financial metrics and KPIs due to our strong financial performance and his performance in 2017.
Alternative CEO Year-Over-Year Compensation Table (2016 vs. 2017)
Annualized Salary | Annual Cash ($) | RSUs ($) | Annualized ($) | Alternative Direct Total Compensation ($) | ||||||||||||||
2016 | 950,000 | 1,383,720 | – | 5,900,000 | 8,233,720 | |||||||||||||
2017 | 950,000 | 1,497,580 | – | 5,900,000 | 8,347,580 |
For more information on the Multi-Year PSUs granted to our NEOs in 2016 and the changes made to our long-term equity incentive program, see “—Elementsawards under our LTIP), with the remaining portion of Executive Compensation—Variable Compensation—Long-Term Equity Incentive Compensation Program” below,their total compensation as well as our 2016 and 2017 proxy statements.their base salary. This emphasis on variable compensation is illustrated in the following pay mix charts:
2021 ANNUALIZED CEO | 2021 AVERAGE ANNUALIZED OTHER NEOS | |||
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64 | MSCI | COMPENSATION MATTERS |
MSCI INC.2018 PROXY STATEMENT 41
COMPENSATION MATTERS
Executive Compensation Practices
Our executive compensation practices incorporate the following corporate governance best practices that protect the interests of our shareholders and are consistent with high standards of risk management.
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| Emphasize variable compensation | |
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incentive opportunities
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| Impose rigorous stock ownership guidelines and requirements on ● 12x annual base salary for our CEO and ● 8x annual base salary for our other | |
NEOs ● 4x annual base salary for other Executive Committee members
| ● Maintain a clawback policy for | |
incentive based-compensation (cash and equity) with provisions that cover a broad range of detrimental conduct and financial restatements
| Provide for double-trigger vesting upon a change in control | |
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at the direction of the Compensation Committee ● Incorporate DE&I and climate-related considerations into our AIP program | ||
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Do not providegross-ups to cover excise taxes ● | ||
Do not allow any directors or employees, including all NEOs, to hedge or pledge the Company’s common stock, | ||
| Do not allow repricing of options or stock appreciation rights | |
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Do not provide for “liberal” share recycling when shares are tendered or withheld to satisfy tax withholding obligations or as payment of an option exercise price |
2022 PROXY STATEMENT | 65 |
Executive Compensation Philosophy and GoalsProcess
We evaluate our executive compensation structure on an annual basis to ensure alignment with our compensation philosophy and business strategy. Our compensation philosophy centers around maintaining a compensation program for our NEOs that is designed to promote the achievement of our short-term and long-term financial and strategic goals. The goals of the Company include:
In addition to those principles described in the “Executive Summary” on page 37 of this Proxy Statement, our executive compensation program described in this section is designed to:
42 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
Our executive compensation philosophy provides a compensation structure which pays base salaries to our NEOs that represent a relatively small percentage of their total compensation, while offering them the opportunity to earn a significant portion of their compensation in the form of variable compensation (i.e., annual cash bonuses and long-term incentive awards). This emphasis on variable compensation is illustrated in our pay mix charts below, which reflect 2017 compensation based on 2017 base salary, the actual annual cash incentives paid to our NEOs in respect of 2017 and the annualized target value of the Multi-Year PSUs attributable to 2017 (i.e.,one-third of the target value) for the CEO and the average of the other current NEOs.
year-long process:
LATE JANUARY/ EARLY FEBRUARY | ● Review and determine the AIP awards for prior-year performance for NEOs based on an assessment of the Company’s achievement of the financial metrics established for the prior year, as well as the executive’s achievement of his or her individual KPIs and DE&I Goals for such prior year. The ● Certify achievement of TSR metrics and any other performance metrics applicable to any equity awards granted in prior years. ● Establish the AIP structure for the current year, including the applicable AIP financial metrics and target ● Establish the structure and performance metrics applicable to equity awards to be granted under the LTIP for the current year, and grant equity awards based on a number of factors, including the | ||
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MARCH | ● Consider risks arising from the Company’s incentive compensation plans. | ||
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APRIL | ● Review Say-on-Pay voting recommendations from proxy advisors and our shareholder vote at our annual meeting. ● Review and approve KPIs for current year’s AIP. | ||
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JULY TO OCTOBER | ● Review our status and progress on our performance culture. ● Review senior management fit for role and potential successors. ● Review peer group. ● Independent compensation consultant reports on compensation practices and trends in ● Review design of | ||
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NOVEMBER |
● Meet with shareholders to discuss our executive compensation policies and collect feedback. | ||
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DECEMBER | ● Finalize design of | ||
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ONGOING | ● Management provides feedback from shareholder outreach regarding our executive compensation program. ● Review progress made on
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66 | MSCI |
Determination of Executive Compensation—Considerations & ProcessIndependent Compensation Consultant
The Company does not have any individual employment, severance, or similar agreements with its NEOs, and therefore, our NEOs are employees “at will.” As a result, the Company is not contractually bound to compensate the NEOs in a specific manner or amount and has the flexibility to alter or revise its compensation programs as circumstances dictate. The CEO makes recommendations to the Committee on compensation for NEOs other than himself, and the Committee takes these recommendations into consideration in reaching its compensation decisions. The Committee has sole authority to make final compensation decisions relating to the NEOs.
TheCompensation Committee selected and engaged Semler Brossy as its independent compensation consultant to assist with a range of executive compensation matters, including the overall design of our executive compensation program, evaluation and selection of peer group companies, provision of competitive market data and other matters related to our NEO compensation program. During 2017,2021, Semler Brossy was present at all Compensation Committee meetings and provided consultationconsulted on executive compensation matters. The Compensation Committee recognizes that it is important to receive objective advice from its outside advisor. Therefore,advisor and regularly meets with Semler Brossy
MSCI INC.2018 PROXY STATEMENT 43
COMPENSATION MATTERS
in Executive Session without management’s attendance. Semler Brossy reports directly to the Compensation Committee, and the Committee,which, pursuant to its charter, maintains sole responsibility for retaining or terminating the compensation consultant. Semler Brossy did not provide any other services to MSCI during 2017.2021.
Executive Compensation Considerations
The Compensation Committee takes into account a range of factors in determining compensation components and setting compensation amounts. Among others, these factors includeIn addition to reviewing NEO performance against annual goals, various financial and operational metrics, KPIs and DE&I Goals, the Compensation Committee reviews peer group analyses provided by Semler Brossy (used as a reference without benchmarking to a specified target), NEO performance against annual goals, various financial and operational metrics and key performance indicators (“KPIs”).shareholder feedback. The weight attributed to each individual factor may change from time to time, depending on the circumstances of such decisions. We believe this continues to be the best approach for the Company, as it enables the Compensation Committee to balance competing interests, address evolving concernspriorities and meet Company objectives.
20172021 Say-on-Pay Vote Results and Shareholder Engagement
In connection with our 2017 annual meeting2021, 96.8% of shareholders, the proposal to approvevotes cast on the executiveSay-on-Pay Advisory Vote were voted in support of the compensation of the Company’s NEOsour NEOs.
HIGH APPROVAL FOR THE LAST 4 YEARS | ||
Shareholder Engagement
MSCI has established a robust process for 2016 received 61,078,364 votes, or 77%engaging shareholders on executive compensation. On at least an annual basis, we meet with shareholders to provide an overview of votes cast. In 2016 and 2015, our executive compensation program received 96.4% and 94.4% of the votes cast, respectively.
Before, during and following the 2017 proxy season, we engagedhighlight changes, if any, that have been made since our last meeting with the governance and/or proxy voting groupsrelevant shareholder. In 2021, the Company met with 14 of 19its largest shareholders (representing approximately 41% of our institutional shareholders, representing a majorityits outstanding shares as of our outstanding common shares,September 30, 2021) in individual meetings to discuss our corporate governance and executive compensation related matters. Our engagement efforts included shareholders both who did and did not vote in favor ofresponsibility practices, including our executive compensation program. Members of our investor relations, executive compensation and corporate governance groups participated in these meetings, and for certain meetings, one of our independent directors was present to answer questions, including our Committee Chair or our Lead Director.
Most of the shareholders with whom we engaged were generally supportive of our current LTIP and its alignment of pay with performance, although certain shareholders had different views as to their preferred performance metrics and the appropriate performance period. Some of the topics which we discussed and received feedback from our shareholders on included certain features of our LTIP (including the Multi-Year PSUs), including:
None of the shareholders we spoke with expressed any significant concerns regardingwith the Committee’sCompany’s compensation decisions in 2017, which are the subject of this year’sSay-on-Pay vote, or the grant of Multi-Year PSUs in 2016. The shareholders we spoke with were in favor of the significant portion of the value of the LTIP awards granted to our NEOs vesting based on performance (rather than solely service vesting). A number of shareholders commented specifically that they supported the Committee’s decision to award our CEO 100% of his equity incentive in the form of PSUs in 2016.
The Committee has carefully considered the results of the 2017Say-on-Pay voteprogram, and the feedback received from shareholders in determininggenerally reacted positively to the Company’s compensation amounts for 2017. Since our 2017Say-on-Pay vote, the Committee’s actions with respect to our CEO’sprogram.
Our 2021 and 2022 compensation relate solely to an increase in his base salary, effective January 1, 2018, from $950,000 to $1,000,000 (the first increase in Mr. Fernandez’s base salary since 2014), the payment of an annual cash bonus of $1.5 million under the AIP in respect of 2017 based on actual performance against the applicable financial metrics and KPIs and an increase of his fiscal 2018 target cash incentive to $1.4 million to be paid under the AIP toprograms reflect competitive market practice.
As we committed to our shareholders and disclosed in 2017, no equity award grants were made to our CEO in 2017, and our other NEOs were only granted RSUs (and no PSUs) in 2017. In 2018, the Committee will continue to honor its commitment to our shareholders and will not grant any equity awards to our CEO and will only grant RSUs (and no PSUs) to our other NEOs. As a result, we will not be in a position to incorporate feedback we received from our shareholders on our LTIP until we design our 2019 LTIP awards, at which time we will take into account the feedback from our shareholders as we consider that design.shareholders.
2022 PROXY STATEMENT | 67 |
RECENT ENHANCEMENTS IN RESPONSE TO SHAREHOLDER FEEDBACK | ||
WHAT WE HEARD | WHAT WE DID | WHY |
Support for cultivating an “owner-operator” mindset | Added a one-year post-vest mandatory holding period to our 3-Year PSUs granted in 2021 | We believe that equity award features that promote an “owner-operator” culture focus our senior leaders on long-term shareholder value creation |
Stronger linkages between ESGand our compensation program | In 2021, introduced DE&I Goals for our senior leaders | We believe that integrating DE&I Goals into our compensation programs ensures executive decision making that aligns with our corporate culture |
Request for disclosure around howthe COVID-19 pandemic impactedour compensation program | In 2021, added disclosures to reflect the Compensation Committee’s decision not to make any changes to the performance goals under the AIP or LTIP (including the target performance levels or actual achievement levels) for 2021 in response to the pandemic, including for any currently outstanding awards | While the Company was less severely impacted by the pandemic than those in other industries, we believe that our compensation program is designed to reflect the economic realities of the operating environment and align with the impact of the operating environment on our stakeholders |
Stronger facilitation of an “owner-operator” mindset and focus onlonger-term strategic goals | In 2022, granted PSOs with a three-year performance period, based on the combined level of achievement of operating and financial metrics, and a ten-year term. PSOs replaced the grant of 5-Year PSUs Implemented more rigorous stock ownership and retention guidelines | We believe that the grant of PSOs with a focus on financial and operating metrics will complement the metrics used in PSUs and provide greater incentives for the execution of the Company’s strategic plan We believe our 2022 LTIP program together with our enhanced stock ownership guidelines will further an “owner-operator” mindset |
Request for disclosure aroundhow our Compensation Committeeassessed performance forpurposes of DE&I Goals | In 2022, added disclosure regarding NEO performance with respect to DE&I Goals as well as the Company-wide approach to assessing performance against DE&I Goals through our Executive Accountability Framework | We believe it is important to convey transparent information around the achievement of DE&I Goals by our senior leaders as well as our process of assessing those goals |
The Company will continue to maintain an active dialogue with shareholders and evaluate feedback on issues of importance to them, including the metrics that drive each of our NEO’s long-term incentive compensation. See page 40 of this Proxy Statement for additional information on our shareholder engagement efforts in 2021.
Peer Groups
To ensure competitiveness of compensation structures and pay levels for our NEOs, the Compensation Committee conducts an annual review of peer company compensation data. Each year, prior to beginning this review, the Compensation Committee examines the composition of companies previously considered our peer companies to make certain that the selected companies continue to be relevant as evaluated according to the following screening criteria:
● | Scale, to reflect similar size and complexity; |
● | Geographic footprint, to reflect business structure and international complexity; |
● | Public ownership structure to ensure availability of data; |
● | Competitors for talent; and |
● | Similar business model. |
68 | MSCI | COMPENSATION MATTERS |
The peer group used to inform fiscal 2021 pay decisions for our NEOs was comprised of 16 companies that, in aggregate, approximated MSCI’s size, scope of operations, and operating metrics. In particular, the group was selected such that it, in aggregate:
● | Approximated MSCI’s size on a revenue basis for fiscal 2021; |
● | Reflected MSCI’s high-margin, high-valuation operating metrics and international reach; and/or |
● | Represented the competitive talent market for financial technology, research and consulting, and data systems/information technology companies. |
Company | GICS Classification |
MSCI Inc. | Financials—Capital Markets—Financial Exchanges and Data |
Aspen Technology Inc. | Information Technology—IT Services—Application Software |
Black Knight Inc. | Information Technology—IT Services—Data Processing and Outsourced Services |
Dun & Bradstreet | Industrials—Professional Services—Research and Consulting Services |
Equifax Inc. | Industrials—Professional Services— Research and Consulting Services |
FactSet Research Systems Inc. | Financials—Capital Markets—Financial Exchanges and Data |
Fair Isaac Corporation | Information Technology—Software—Application Software |
Gartner, Inc. | Information Technology—IT Services—IT Consulting and Other Services |
IHS Markit Ltd. | Industrials—Professional Services—Research and Consulting Services |
MarketAxess Holdings Inc. | Financials—Capital Markets—Financial Exchanges and Data |
Moody’s Corporation | Financials—Capital Markets—Financial Exchanges and Data |
Morningstar, Inc. | Financials—Capital Markets—Financial Exchanges and Data |
SEI Investments Company | Financials—Capital Markets—Asset Management and Custody Banks |
S&P Global Inc. | Financials—Capital Markets—Financial Exchanges and Data |
SS&C Technologies Holdings, Inc. | Information Technology—Software—Application Software |
TransUnion | Industrials—Professional Services—Research and Consulting Services |
Verisk Analytics, Inc. | Industrials—Professional Services—Research and Consulting Services |
Review for 2022
In its annual review of the executive compensation peer group for 2022, the Compensation Committee undertook a holistic review of the executive compensation peer group and determined the group to be sufficiently robust for market comparisons and balances. Accordingly, the Compensation Committee maintained the same peer group, as the selected companies met the same criteria described above for 2021 and the group continued to be an appropriate size.
2022 PROXY STATEMENT | 69 |
44 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
Elements of Executive Compensation
Our executive compensation program in 2021 generally has consisted of the following elements:elements. We have also noted changes implemented in 2022 where applicable.
Compensation Element | Purpose | 2021 | 2022 | |||
ANNUAL BASE SALARY
| Provides certainty and predictability to meet ongoing living and other financial commitments | ● The only fixed component of our executive compensation program | ● The only fixed component of our executive compensation program. ● In 2022, each of Messrs. Wiechmann and Gutowski received an increase to his annual base salary after a consideration of several factors, including peer group market data and competitive practices | |||
ANNUAL INCENTIVE (Cash Bonus)
| Intended to drive one-year performance results against financial targets and other Company, individual and leadership focused goals | ● Metrics vary by executive, but include: ● Revenue ● Adjusted EPS ● Net New Sales ● Free Cash Flow ● Key Performance Indicator/Leadership Effectiveness Goals ● DE&I Goals | No change to metrics | |||
LONG-TERM INCENTIVES
| Fosters an “owner-operator” mindset, closely aligns management’s interests with the long-term interests of our shareholders and promotes the retention of key members of our management team | ● RSUs which ratably service vest over three years ● Grant of 3-Year PSUs and 5-Year PSUs (which vest based on absolute TSR) ● 3-Year PSUs cover a cumulative three-year performance period ● 5-Year PSUs cover a cumulative five-year performance period ● Each of Messrs. Fernandez and Pettit received 100% of their LTIP awards in the form of PSUs for 2021, with 60% of their PSUs granted in the form of 5-Year PSUs, the highest percentage amongst all of our NEOs for 2021 (for Mr. Pettit, an increase from 50% in 2020) | ● RSUs which cliff vest after a three-year vesting period ● Grant of 3-Year PSUs (which vest based on absolute TSR) ● PSOs with a three-year performance period which vest based on the combined level of achievement of a cumulative adjusted EPS performance metric and a cumulative revenue performance metric ● Each of Messrs. Fernandez and Pettit received 100% of their LTIP awards in the form of performance awards, with 50% in the form of PSUs and 50% in the form of PSOs, with other NEOs receiving a mix of 30% RSUs, 35% PSOs and 35% PSUs |
The primary objectives for each elementTable of our executive compensation program are outlined in the chart below and described in further detail where noted.
Contents
70 | MSCI | COMPENSATION MATTERS | |||
Element
Purpose
Design
Annual Base Salary
(starts on page 46)
• The only fixed component of our executive compensation program
• Provides certainty and predictability to meet ongoing living and other financial commitments
• Base salaries are set at competitive market rates
Annual Incentive
(Cash Bonus)
(starts on page 47)
• Intended to drive one year performance results against financial targets and other Company, individual and leadership focused goals
• Metrics vary by executive, but include:
• Revenue
• Adjusted EPS
• Net New Sales
• Free Cash Flow (defined as net cash provided by operating activities, less CAPEX)
• Contribution Margin (expressed in dollars)
• Key Performance Indicator/Leadership Effectiveness Goals
MSCI INC.2018 PROXY STATEMENT 45
COMPENSATION MATTERS
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Fixed Compensation
Annual Base Salary
Base salary is the only fixed component of our executive compensation program. The annual base salary element offers our NEOs a measure of certainty and predictability to meet ongoing living and other financial commitments. In setting base salaries for our NEOs, the Compensation Committee has sought to establish base salary rates that (i) are competitive with those provided for similar positions at companies in our peer group.group and (ii) recognize the experience and performance of the NEO. The Compensation Committee reviews the base salaries of our NEOs on an annual basis.
Effective January 1, 2017, Mr. Pettit None of our NEOs received an increase in base salary from £335,548 to £472,000 and Mr. Seyer received an increase in base salary from £355,348 to £472,000. These increases reflect competitive market practice for their respective roles.
2021.
Name | 2021 Base Salary Rate ($) | ||||
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Henry A. Fernandez |
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C. D. Baer Pettit (1) |
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Scott A. Crum | 550,000 | ||||
Robert J. Gutowski |
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(1) | Base salary for Mr. Pettit was paid in British pounds sterling and converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.37571. Mr. Pettit’s 2021 base salary rate was £625,000. |
Effective January 1, 2018, Mr. Fernandez received an increase in base salaryVariable Compensation
The variable compensation actually paid to our NEOs is subject to performance metrics that are designed to (i) emphasize pay for performance, (ii) balance short-term and long-term incentives, and (iii) take into account input from $950,000 to $1,000,000 (the first increase in Mr. Fernandez’s base salary since 2014), Mr. Pettit received an increase in base salary from £472,000 to £625,000, and Mr. Crum received an increase in base salary from $525,000 to $550,000. These increases were made as part of the Committee’s annual review of the NEOs’ base salaries and were intended to align their base salaries with the competitive market practice for their respective roles. Additionally, Mr. Pettit’s increase reflects the expansion of his responsibilities in connection with his appointment to President on October 31, 2017.
Variable Compensation
our shareholders. The variable elements of our target-based incentive compensation program include bothinclude:
(1) an annual cash incentive component; and
(2) a long-term equity incentive component.
In determining target cash and equity incentive compensation amounts for each NEO, the
46 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
Compensation Committee takes into account a number of factors, including: the differences in relative responsibilities; experience and performance in role; the ability to impact overall Company performance; Company, product segment and individual performance; and historical compensation and peer group analyses (used as a reference without benchmarking to a specified target).
The variable compensation actually paid to our NEOs is subject to complementary performance metrics which are designed to emphasize pay for performance and balance short-term and long-term incentives and take into account input from our shareholders, as follows:
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There is no minimum or guaranteed amount of variable compensation payable to the NEOs, meaning thatNEOs. The Compensation Committee makes determinations, in its discretion, as to the Committee has the discretion to choose not to pay anyamounts of variable compensation to NEOs with respect to any year. If the Committee does determine to award variable compensation, it determines each component individuallyawarded based on the factors described above,program metrics and individual performance, subject to the terms of any applicable plan or arrangement.
2022 PROXY STATEMENT | 71 |
Annual Incentive PlanCash Incentives
The Company awards annual cash incentives pursuant to the Company’s AIP, which closely aligns management’s interests with those of shareholders by employing a formulaic approach that takes into account specific financial criteria and individual KPIs and DE&I Goals when determining cash incentives. The Compensation Committee believes that subjecting a portion70% of the target cash incentive topre-established performance targets further promotes shareholder value creation by more directly aligning executive compensation with Company performance and strategic goal attainment.
Each Under the AIP, each NEO is eligible to earn an annual target cash incentive under the AIP. The table below sets forth the 2017 target cash incentive opportunities for the NEOs under the AIP. Our NEOs’ 2017 annual target cash incentive awards were not changed from 2016.
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Under the AIP, participantsand may receive between 0% and 150% of their target cash incentive opportunity based on attainment of the level of certain financial performance metrics (weighted(together, weighted at 70%) and, individual KPIs (weighted at 30%20%) and DE&I Goals (weighted at 10%). For 2017,2021, the target cash incentive opportunity, metrics, and corresponding weightings for our NEOs are included in the table set forth below:
Financial Component—Overall Weighting of 70% | |||||||||||||||
MSCI Metrics | |||||||||||||||
Name | 2021 Target Cash Incentive ($) | Revenue | Adjusted EPS | Total Net New Sales | Free Cash Flow | KPIs | DE&I Goals | ||||||||
Henry A. Fernandez | $ | 1,400,000 | 20.0% | 30.0% | 40.0% | 10.0% | 20.0% | 10.0% | |||||||
Andrew C. Wiechmann | $ | 600,000 | 20.0% | 30.0% | 40.0% | 10.0% | 20.0% | 10.0% | |||||||
C. D. Baer Pettit(1) | $ | 1,238,139 | 20.0% | 30.0% | 40.0% | 10.0% | 20.0% | 10.0% | |||||||
Scott A. Crum | $ | 700,000 | 20.0% | 30.0% | 40.0% | 10.0% | 20.0% | 10.0% | |||||||
Robert J. Gutowski | $ | 650,000 | 20.0% | 30.0% | 40.0% | 10.0% | 20.0% | 10.0% |
(1) | The 2021 target annual cash incentive opportunity reflected in the table above for Mr. Pettit was converted from British pounds sterling to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.37571 for fiscal 2021. Mr. Pettit’s actual 2021 target cash incentive amount was £900,000. |
MSCI INC.2018 PROXY STATEMENT 47FINANCIAL COMPONENT
COMPENSATION MATTERS
Financial Component—Overall weighting of 70% | Key Performance Indicators (KPIs) | |||||||||||||||||||||||||||||||||
MSCI Metrics | Product Metrics | |||||||||||||||||||||||||||||||||
Name | 2017 Target Cash Incentive ($) | Revenue | Adjusted EPS | Total Net New Sales | Free Cash Flow | Analytics Total Net New Sales | Index Total Net New Sales | “All Other” | ||||||||||||||||||||||||||
Henry A. Fernandez | $1,200,000 | 17.5 | % | 28.0 | % | 17.5 | % | 7.0 | % | – | – | – | 30.0 | % | ||||||||||||||||||||
Kathleen A. Winters | $ 800,000 | 17.5 | % | 28.0 | % | 17.5 | % | 7.0 | % | – | – | – | 30.0 | % | ||||||||||||||||||||
C. D. Baer Pettit | $ 850,000 | 17.5 | % | 28.0 | % | 17.5 | % | 7.0 | % | – | – | – | 30.0 | % | ||||||||||||||||||||
Laurent Seyer | $ 850,000 | 14.0 | % | 14.0 | % | – | 7.0 | % | 14.0 | % | 14.0 | % | 7.0 | % | 30.0 | % | ||||||||||||||||||
Scott A. Crum | $ 600,000 | 17.5 | % | 28.0 | % | 17.5 | % | 7.0 | % | – | – | – | 30.0 | % |
The threshold, target and maximum for each financial component making up the AIP, as well as the actual results attained for 2017,2021, are included in the table set forth below.
Threshold | Target | Maximum | Actual(2) | |||||||||||||||
Metrics | Target $mm(1) | % Of Target | Payout (% Of Opportunity) | % Of Target | Payout (% Of Opportunity) | % Of Target | Payout (% Of Opportunity) | % Of Target | Payout (% Of Opportunity) | |||||||||
MSCI Revenue | 1,894.6 | 95% | 50% | 100% | 100% | 105% | 150% | 107.9% | 150% | |||||||||
MSCI Adjusted Earnings Per Share | 8.37 | 90% | 50% | 100% | 100% | 110% | 150% | 118.9% | 150% | |||||||||
MSCI Total Net | 225.3 | 70% | 50% | 100% | 100% | 130% | 150% | 112.3% | 120.4% | |||||||||
New Sales | ||||||||||||||||||
Free Cash Flow | 687.1 | 85% | 50% | 100% | 100% | 115% | 150% | 128.5% | 150% |
(1) | Except Adjusted EPS, which is not stated in millions. |
(2) | In determining the actual results attained for the Total Net New Sales metric under the 2021 AIP, the Compensation Committee made an adjustment to the Company’s reported results in accordance with the terms of the AIP, which permits the Compensation Committee to make adjustments, in whole or in part, to any performance measures (and the methodologies relating to such measures) for certain events specified in the AIP. Specifically, the Compensation Committee made an adjustment to the reported results for the Total Net New Sales metric to recognize a one-time customer payment in 2021 of $18 million. The Compensation Committee made this adjustment because the customer payment resulted in economic benefits to the Company similar to a non-recurring sale, but, absent this adjustment, would not have been taken into account under the Total Net New Sales category in 2021 or future years given the nature of the performance metrics. Non-recurring sales are credited at 75% for the Total Net New Sales category for compensation purposes under the AIP. As a result, there was a positive adjustment to the achievement of the Total Net New Sales metric under the 2021 AIP of $13.5 million. |
Threshold | Target | Maximum | Actual | |||||||||||||||
Metrics | Target $MM | % of Target | Payout (% of Opportunity) | % of Target | Payout (% of Opportunity) | % of Target | Payout (% of Opportunity) | % of Target | Payout (% of Opportunity) | |||||||||
MSCI Revenue | 1,237.4 | 95% | 50% | 100% | 100% | 105% | 150% | 103.0% | 129.7% | |||||||||
MSCI Adjusted Earnings Per Share | 3.50 | 90% | 50% | 100% | 100% | 110% | 150% | 113.7% | 150.0% | |||||||||
MSCI Total Net New | 114.4 | 70% | 50% | 100% | 100% | 130% | 150% | 105.0% | 108.4% | |||||||||
Free Cash Flow | 339.1 | 85% | 50% | 100% | 100% | 115% | 150% | 104.8% | 116.0% | |||||||||
Analytics Total Net New Sales | 34.8 | 60% | 50% | 100% | 100% | 140% | 150% | 117.2% | 121.5% | |||||||||
Index Total Net New Sales | 58.7 | 60% | 50% | 100% | 100% | 140% | 150% | 103.2% | 104.0% | |||||||||
“All Other” Total Net New Sales(1) | 20.8 | 60% | 50% | 100% | 100% | 140% | 150% | 90.0% | 87.5% |
72 | MSCI | COMPENSATION MATTERS |
In determining the actual cash incentive amounts awarded under the 2021 AIP, the Compensation Committee made certain adjustments to the target financial metrics applicable to our NEOs in accordance with the terms of the AIP, which permits the Compensation Committee to make adjustments, in whole or in part, to any performance measures (including target performance levels) for certain events specified in the AIP. Specifically, the Compensation Committee made adjustments to the target metrics listed below to take into account the impact resulting from (1) the Company’s acquisition of RCA on September 13, 2021 and (2) accelerated cash tax payments that impacted the Company’s free cash flow in 2021 and that were not originally part of the Company’s operating plan.
Metrics | Original Target $mm | Adjustments $mm | Adjusted Target $mm | |||
MSCI Revenue | 1,872.4 | +22.1 | 1,894.6 | |||
MSCI Total Net New Sales | 222.2 | +3.1 | 225.3 | |||
Free Cash Flow | 790.1 | -103.0 | 687.1 |
KPI COMPONENT AND DE&I GOALS COMPONENT
The Compensation Committee believes that including KPIs (20% of the target AIP cash bonus amount) and DE&I Goals (10% of the target AIP cash bonus amount) under the AIP provides an opportunity to assess individual results against specific goals as well as progress against multi-year efforts. The Compensation Committee regularly assesses the components and metrics used in the AIP and the weighting of those components and metrics, in addition to taking into account shareholder feedback.
In 2021, we accelerated our commitment to advancing DE&I by linking the AIP target compensation of each Managing Director, including each of our NEOs, to DE&I progress. Our Managing Directors’ DE&I Goals are intended to ensure long-term stability at the Company, align with our long-term strategy and enhance our DE&I objectives. In particular, our CEO’s KPIs and DE&I Goals are directly tied to long-term strategic transformation, succession planning, new-hire onboarding and strengthening MSCI’s culture of inclusion and belonging, all of which build a strong foundation for future growth.
We developed an Executive Accountability Framework (“EAF”) to establish the philosophy and process to assess each Managing Director’s progress against DE&I Goals and overall DE&I performance, considering specific goals set by each Managing Director at the beginning of the year. The EAF stresses that creating an inclusive environment is as important as improving diverse representation; therefore, Managing Directors are assessed on their qualitative and quantitative results with a range of potential outcomes including those relating to talent development, retention, hiring practices and engagement. In addition, leaders are assessed as to whether they consistently display inclusive leadership behaviors and drive activity that fosters an inclusive environment. Each NEO was assessed individually with further calibration across all NEOs. Performance recommendations were then made to the Compensation Committee, which reviewed and approved performance in respect of each NEO.
2022 PROXY STATEMENT | 73 |
Drive exceptional financial performance andenhance capitalmanagement | ● Achieved exceptional results in 2021, demonstrating the strength of an ambitious strategy, key long-term investments and consistent execution, along with unprecedented demand for the Company’s solutions. ● Highlights include the following (versus 2020): ● 2021 Full-Year Operating Revenue of $2.04 billion, up 20.5%. ● 2021 Full-Year Net New Sales up 48.7%. ● 2021 Full-Year Adjusted EPS* up 27.1%. ● 2021 Full-Year Free Cash Flow* up 16.2%. ● Expanded MSCI’s role as a change agent for ● Led strategic progress in providing the common language and tools investors use for indexation, risk management, factors, ESG, climate and other key investment categories. ● Oversaw “triple crown” investments to help fuel future growth and meet client demand, including through the acquisition of Real ● Returned capital to shareholders, including opportunistically repurchasing approximately $140 million of MSCI common stock and |
The KPI component is weighted at 30% for all NEOs. In assessing the KPI component, the Committee took into account the performance of each NEO, as described below. SeeAnnex B for the definitions of eachnon-GAAP measure, reconciliations of eachnon-GAAP financial measure with the most comparable GAAP measure and other information regarding the use ofnon-GAAP financial measures.returning approximately $300 million to shareholders in the form of quarterly dividends (increase of approximately 23% versus 2020).
Henry A. Fernandez, Chairman of the Board and CEO
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new products and services to accelerate growth, and launched new partnerships to capture emerging opportunities. Examples include:
● Entered into new partnership agreement with Royalty Pharma plc to expand MSCI’s existing thematic index suite with new indexes that aim to represent the performance of ● Licensed China A 50 Connect Index to HKEX, leading to the ● Jointly created the MSCI COLCAP Index with the Colombia Stock Exchange.
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48 MSCI INC.2018 PROXY STATEMENTselect third-party content.
COMPENSATION MATTERS
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● Net-Zero Tracker, a quarterly gauge of progress by public companies toward curbing climate risk. The Tracker calculates the individual and aggregate emissions of all MSCI ● Climate Lab Enterprise, which helps investors monitor and manage climate-related risks. ● Implied Temperature Rise, a search tool that computes and discloses how the emissions trajectories of ● Carbon Footprinting of Private Equity and Debt Funds, a product jointly developed with Burgiss and MSCI’s ESG team, which measures the
● Prioritized MSCI’s own climate goals through a more robust commitment to corporate responsibility, including by the
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* | “Adjusted EPS” and |
globally
74 | MSCI | COMPENSATION MATTERS |
Strengthen MSCI’s commitment to
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● Appointed first Chief Diversity Officer. ● Introduced DE&I Executive Accountability Framework, aligned with incentive compensation.
● Strengthened MSCI’s culture of inclusion and belonging: ● Conducted listening tour with 16 local offices, where DE&I was a
● Conducted a fireside chat at the 4th Annual Global DE&I Summit in November, celebrating and
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Kathleen A. Winters, CFO
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MSCI INC.2018 PROXY STATEMENT 49
H. Fernandez (continued)
COMPENSATION MATTERS
K. Winters (continued)
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● According to
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C. D. Baer Pettit, PresidentTable of Contents
2022 PROXY STATEMENT | 75 |
ANDREW C. WIECHMANN, CHIEF FINANCIAL OFFICER AND TREASURER |
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● Drove enhancements to overall financial management process, including the internal capital allocation process to ensure a rigorous and intense focus on triple-crown investment activity and firm-wide efficiencies. ● Proactively managed investments and firm resources to capitalize on market opportunities, drive financial performance and ensure strong execution, with a focus on value creation, helping to drive record financial results for 2021 across key metrics. | |
Championcontinuedtransformationof the financeorganizationand firmwide processes | ● Continued intense focus on process simplification and automation to improve efficiency. ● Rationalized, simplified and automated internal reporting. ● Oversaw successful deployment of enhanced revenue management system and broader subscription revenue processes. ● Drove alignment and enhanced decision making through key metric visibility, improved forecasting and process discipline. ● Incorporated risk management in operating rhythm to ensure broader awareness around and intentionality in levels of Company risk. ● Continued buildout of business intelligence capabilities to enhance understanding of markets and competitors, improve decision making and optimize outcomes. | |
Enhance capitaldiscipline andfurther optimizecapital structure | ● Advanced firmwide focus on optimizing cash flow dynamics of the business through proactive working capital management and enhanced client contract discipline. ● Capitalized on attractive market opportunities to enhance credit profile, lower cost of capital and extend maturities. ● Executed $1.8 billion of new financing transactions, including refinancing $1 billion of outstanding debt, and extended the life of our revolving credit facility. ● Meaningfully extended debt maturities (with the earliest maturity being eight years out) and materially reduced weighted average cost of debt. ● Achieved an investment grade rating from Fitch and an upgrade from Moody’s. | |
Further instillfirmwide cultureof mergers,partnerships and acquisitions(“MP&A”) | ● Drove enhanced firmwide focus on MP&A to accelerate key strategic growth areas and enable further business expansion. ● Formalized processes with product and functional leaders to develop and manage MP&A opportunity pipeline in order to drive focus and accountability. ● Successfully attracted and onboarded key new Strategy and Corporate Development hire to help drive MP&A culture. ● Successfully executed and drove value realization of two acquisitions, two minority investments and 20+ strategic partnerships in priority areas. ● Implemented new policies and procedures for engaging with existing and prospective partners to ensure alignment with MSCI’s corporate responsibility objectives. | |
Enhance diverserepresentationwithin thefinance organization andthroughout MSCI | ● As a result of expanded recruiting outreach to broader qualified talent pool, increased diversity in Finance organization globally. ● Championed diversity in all talent development, promotion and succession decisions in the Finance organization to ensure all talent is being appropriately considered and supported. ● Acted as Executive Sponsor of All Abilities Network. ● Active participant as speaker/sponsor of ERGs: Women’s Leadership Forum, MSCI Pride, Black Leadership Network and All Abilities Network; participant in 4th Annual Global DE&I Summit. |
76 | MSCI | COMPENSATION MATTERS |
BAER PETTIT, PRESIDENT & CHIEF OPERATING OFFICER |
Prioritizeinvestmenttargets to drivegrowth | ● Drove greater investment into high growth areas and delivered strong financial and operating results: ● Drove record financial results and growth in 2021 across key metrics. ● Oversaw the
● Drove the 2022 Operating Plan process by emphasizing critical growth areas, with a heightened focus on client-centricity. Continued to identify and
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50 MSCI INC.2018 PROXY STATEMENTcreate additional investment capacity.
C. D. Baer Pettit, President (continued)
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Laurent Seyer, Chief Operating Officer and Chief Client Officer
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● Directed investment into new ISaaS offerings.
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● MSCI INC.2018 PROXY STATEMENT 51
COMPENSATION MATTERS
Scott A. Crum, Chief Human Resources Officer
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● Drove progress on cloud migration across multiple product lines in a cost-efficient manner, including the complete migration of ESG and Climate applications and services. | |
Focus on beingpartner of choiceand helping ourclients buildbetter portfolios | ● Oversaw improvements to client experience by simplifying contract structures, promoting greater automation and adding tools to help clients find relevant content more efficiently. ● Optimized incentive compensation programs within the Client Coverage organization to drive focus on client-centricity. ● Prioritized the “Wealth” client segment, leveraging our various tools and solutions to better capitalize on the growing demand for customization in investment processes. ● Prioritized focus on new research, including related to ESG and Climate and Thematics, to provide clarity on key investment problems. ● Developed new ESG and Climate solutions, including through the launch of the first Paris Aligned Fixed Income indexes in the market. | |
Instill practicesthat supportan inclusiveand innovativeculture | ● Actively supported efforts to ensure that all Managing Directors have, and are measured against, specific and individualized DE&I Goals. ● Served as executive sponsor for the Pride and Allies ERGs, including by hosting a town hall and speaking at the Pride and Allies Summit. ● Conducted career conversations to support internal succession planning for key roles within the Research and Product functions. ● Supported development of a leadership profile to evaluate candidates more objectively for assessment, selection and promotion. ● Oversaw use of MSCI’s innovation ‘Breakthrough’ methodology in numerous areas, including talent attraction and mobility, Future of Work challenges and DE&I initiatives, resulting in the establishment of transformational practices around recruiting and hybrid-work collaboration. |
2022 PROXY STATEMENT | 77 |
SCOTT A. CRUM, CHIEF HUMAN RESOURCES OFFICER |
Strengthen oursenior talentpipeline | ● Significantly accelerated Executive Committee succession and progression planning by focusing on preparing internal senior talent and identifying external pipeline of senior talent. ● Created Managing Director and Executive Committee success profiles, which will serve as the basis for future selection, promotion and progression decisions. ● Developed Managing Director assessment, selection, promotion and progression methodology. ● Hired 11 Managing Directors in 2021, with strong diversity across both gender and ethnicity. ● Developed rigorous approach for identifying specific capability gaps for converting learning programs, including our flagship leadership and management programs, to virtual. ● Expanded learning offerings, including programs to support our Future of Work implementation, inclusive leadership efforts and the well-being of our people. | |
Advance ourculture ofdiversity, equityand inclusion | ● Appointed MSCI’s first Chief Diversity Officer, responsible for operating across MSCI to align our DE&I goals with business outcomes. ● Introduced DE&I metrics for Managing Directors tied to 10% of target annual cash incentive compensation. ● Hired thirty-six interns to the One MSCI internship program in New York, Chicago and London. ● Launched three new ERGs in 2021: Asian Support Network, All Abilities Network and Hola! MSCI. ● Offered unconscious bias training to all employees globally, using a science-based approach with practical applications, to raise awareness of bias and create a more inclusive culture. ● Enhanced pay equity practices for all female new hires. | |
Continue tosupport andenhance ourperformance andgrowth culture | ● Developed and implemented our comprehensive Future of Work program that contained vision, principles and global guidelines. ● Led organizational design initiative, which yielded new organizational design and senior leadership structure. ● Redesigned our long-term incentive program to further support an “owner-operator” culture. ● Positioned MSCI as a place for climate-focused talent to build their careers. ● Using MSCI’s “Breakthrough Methodology,” transformed the way MSCI attracts and recruits. ● Sponsored initiatives focused on increasing speed and quality of hiring. ● Established Human Resources Operational Effectiveness Team to allow various teams within the Human Resources organization to work under a singular vision of driving the creation and adoption of |
78 | MSCI | COMPENSATION MATTERS |
ROBERT J. GUTOWSKI, GENERAL COUNSEL |
Enhancecorporategovernance andresponsibility practices andprofile, includingadvancing ESGand climateinitiatives | ● Advised on and championed increased ESG reporting and related shareholder engagement. ● Counseled Chief Responsibility Officer and CRC on climate initiatives, including net-zero commitments and related company policies, activities and initiatives. ● Managed compliance with global legal requirements related to pandemic response, including advising on return-to-work protocols and implementation of MSCI’s Future of Work program across more than 20 countries. | |
Leaddevelopmentof clientcontracting efficiencies toimprove clientexperience andaccelerate/growsales | ● Improved client contract automation processes. ● Increased deal speed and capacity. ● Simplified contract structures and ease of licensing across multiple product lines under a single client contract. ● Facilitated enterprise scale transactions and relationships. ● Enhanced cross-functional coordination of contract lifecycle from contract inception through signature and booking. | |
Expandengagement withregulators andpolicymakers | ● Successfully onboarded a Head of Government and Regulatory Affairs to coordinate proactive engagement globally. ● Established productive relationships and open dialogues with key regulators in multiple jurisdictions, with a focus on enhancing their understanding of the scope, role and uses of our ESG and climate and index products. ● Established MSCI as a trusted resource by providing expert research, data and insights to policymakers regarding market practices. | |
Embracetechnology andinnovation todrive operationalimprovements | ● Assessed technology stack across both Compliance and Internal Audit to improve scale and speed of monitoring and testing activities. ● Benchmarked against market leading enabling technology tools, which include Power BI, artificial intelligence/machine learning, data analytics and robotic process automation. ● Evaluated program design, implementation and effectiveness against regulatory guidance and published areas of regulatory scrutiny and focus. | |
Activelychampionand promotea departmentand companycommitment to a culture of DE&Ithat moves fromawareness toaction | ● Closely partnered with and advised Chief Diversity Officer on DE&I initiatives and disclosures, including pay equity, diversity reporting, goal setting, ERG programming and recruiting activities. ● Served as Executive Sponsor and vocal advocate for the Black Leadership Network, an MSCI ERG focused on enhancing the recruitment, development, retention and promotion of Black employees. ● Raised MSCI’s DE&I leadership profile by becoming a signatory to the General Counsel Pledge to support the American Bar Association’s Resolution 113, which aims to enhance diversity in the legal profession through law firm disclosure of diversity data. |
2022 PROXY STATEMENT | 79 |
Actual cash incentives paid in respect of 20172021 were based on actual performance against the financial, KPI and KPIDE&I targets under the AIP as set forth in the table below. Given our strong financial performance, coupled with generally above-targettarget payouts on the KPI goals, our NEOs received cash incentives for 20172021 that were aboveapproximately equal to their target values.
2017 Financial Payout
| 2017 KPI Payout
| 2017 Total Actual Cash Incentive (Total)
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Name | 2017 Target Cash Bonus ($) | Value ($) | as % of Target | Value ($) | as % of Target | Value ($) | as % of Target | |||||||||||||||||||||
Henry A. Fernandez
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| $1,200,000
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| 1,101,576
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| 131.14%
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| 369,004
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| 110.0%
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| 1,497,580
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| 124.8%
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Kathleen A. Winters
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| $ 800,000
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| 734,384
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| 131.14%
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| 240,006
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| 100.0%
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| 974,390
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| 121.8%
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C. D. Baer Pettit
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| $ 850,000
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| 780,283
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| 131.14%
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| 280,504
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| 110.0%
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| 1,060,787
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| 124.8%
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Laurent Seyer
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| $ 850,000
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| 722,211
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| 121.38%
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| 280,504
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| 110.0%
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| 1,002,715
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| 118.0%
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Scott A. Crum
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| $ 600,000
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| 550,788
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| 131.14%
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| 198,002
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| 110.0%
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| 748,790
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| 124.8%
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Fiscal 2018 target cash incentives to be paid under the AIP include increases to $1.4 million, £785,000 ($1,011,609 using a fiscal year 2017 daily spot rate of £1 to $1.288674) and £700,000 ($902,072 using a fiscal year 2017 daily spot rate of £1 to $1.288674) for each of Messrs. Fernandez, Pettit and Seyer, respectively. These increases reflect competitive market practice for their respective roles.
2021 Target | 2021 Financial Payout (70% Weighting at Target) | 2021 KPI Payout (20% Weighting at Target) | 2021 DE&I Goals Payout (10%) | 2021 Total Actual Cash Incentive | ||||||||||||||
Name | Cash Incentive ($) | Value ($) | As % of Target | Value ($) | As % of Target | Value ($) | As % of Target | Value ($) | As % of Target | |||||||||
Henry A. Fernandez | 1,400,000 | 1,354,092 | 138.2% | 308,008 | 110.0% | 154,000 | 110.0% | 1,816,100 | 129.7% | |||||||||
Andrew C. Wiechmann | 600,000 | 580,325 | 138.2% | 126,005 | 105.0% | 60,000 | 100.0% | 766,330 | 127.7% | |||||||||
C. D. Baer Pettit(1) | 1,238,139 | 1,197,539 | 138.2% | 272,393 | 110.0% | 123,814 | 100.0% | 1,593,746 | 128.7% | |||||||||
Scott A. Crum | 700,000 | 677,046 | 138.2% | 154,004 | 110.0% | 77,000 | 110.0% | 908,050 | 129.7% | |||||||||
Robert J. Gutowski | 650,000 | 628,686 | 138.2% | 136,504 | 105.0% | 71,500 | 110.0% | 836,690 | 128.7% |
(1) | The actual cash incentive bonus amount paid to Mr. Pettit was converted from British pounds sterling to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.37571. |
52 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
Long-Term Equity Incentive Compensation Program (LTIP)
The Compensation Committee believes that MSCI’s executive compensation program should reinforce a pay for performancepay-for-performance culture that aligns the interests of our senior executives with those of our shareholders by incorporating the achievement of multi-year share-based performance metrics into variable compensation awards (in addition to the annual financial metrics applicable to cash incentive awards under the AIP). In 2017,
While equity-based awards are typically granted on an annual basis under our LTIP program, we followed our typical practice of granting annual LTIP awards following the regularly scheduled annual meeting of the Committee in January. We also periodically grant off-cycle LTIP awards (e.g., for new hires,hire grants, replacement grants, retention grants, etc.). The grant date for such awards is determined on an individual basis, typically based on the applicable start date or the date of the event whichthat triggered the award.
RSUsIn 2021, the Company’s long-term equity incentive compensation program largely stayed the same compared to 2020, and we followed our typical practice for granting annual LTIP awards in early February 2021 following the regularly scheduled annual meeting of the Compensation Committee in late January 2021.
OurIn 2021, the Compensation Committee continued to place a strong emphasis on pay for performance by granting a significant portion of equity incentive awards in the form of PSUs that are subject to multi-year TSR-based performance metrics, which the Compensation Committee believes more closely align the Executive Committee’s goals with those of the Company’s shareholders and complement the annual financial metrics applicable to cash incentive awards under the AIP.
The Compensation Committee approved the grant of two types of 2021 PSU awards to the members of the Company’s Executive Committee, including the NEOs: 3-Year PSUs and 5-Year PSUs. Given the generally positive feedback on the rigor of the TSR CAGR goals we received in the past from our shareholders, the Compensation Committee carried forward the absolute TSR CAGR performance metric for the 2021 PSUs. As detailed below, the Compensation Committee also granted RSUs to all NEOs other than Messrs. Fernandez and Pettit.
Additionally, to further promote our “owner-operator” mindset, the Compensation Committee added a one-year post-vest mandatory holding period to our annual 2021 3-Year PSUs that were granted to our NEOs, where such shares, or rights with respect to such shares, may not be transferred until the expiration of such holding period.
The Compensation Committee believes that the grant of 2021 PSUs to the Executive Committee members provides greater incentives for the execution of the Company’s strategic plan and the creation of additional value-enhancing corporate development initiatives.
80 | MSCI | COMPENSATION MATTERS |
2021 Equity Mix
The table below sets forth the allocation of 2021 RSUs, 3-Year PSUs and 5-Year PSUs granted to the NEOs. As reflected in the table below, in 2021, Mr. Fernandez and Mr. Pettit received service-vesting 100% of their equity incentive compensation in the form of PSUs. For 2021, the Compensation Committee increased the proportion of Mr. Pettit’s 5-Year PSUs to 60% of his overall equity compensation in 2021 (with the remaining 40% granted in the form of 3-Year PSUs). We believe this change further aligns the interests of Mr. Pettit with those of our shareholders and reinforce our “owner-operator” philosophy and the execution of our strategic plan.
Vehicle | CEO | President & COO | Other NEOs | |||
RSUs | 0% | 0% | 30% | |||
3-Year PSUs | 40% | 40% | 35% | |||
5-Year PSUs | 60% | 60% | 35% |
RSUs
RSUs for their long-term incentive awardsare inherently aligned with the interest of our shareholders because they are linked to share price appreciation. They also increase the retentive value of our overall compensation program. RSUs granted in 2017. Mr. Fernandez did not receive any equity awards in 2017. These RSUs2021 vest in equal annual installments on each of the first, second and third anniversaries of the grant date.date, subject generally to continued employment with the Company. While these RSU awards do not have explicit performance-vesting conditions, the ultimate value that maywill be delivered to our NEOs from these awards depends on our future stock price performance. The table below shows the value on the grant date of the RSU awards granted to our NEOs in 2017.
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Multi-Year PSUs
As described above, none of our NEOs were granted PSU awards in 2017 in light of the Multi-Year PSUs that were granted to the members of the Company’s Executive Committee, including each NEO, in 2016 in connection with the changes made to our LTIP. These changes, as well as the grant of the Multi-Year PSUs, were intended to provide greater incentives for the execution of the Company’s three-year strategic plan, the creation of additional long-term value-enhancing corporate development initiatives and closer alignment of our executives’ interests with those of the Company’s shareholders.
The Multi-Year3-Year PSUs cover three years of the PSU component of equity compensation (i.e., 2016, 2017 and 2018), and, as such, Mr. Fernandez will not receive any equity awards until 2019 (since 100% of his equity compensation is delivered5-Year PSUs granted in the form of Multi-Year PSUs). Our other NEOs will also not receive any grants of PSUs until 2019, but will, as described above, continue to be eligible for annual awards of RSUs.
The Multi-Year PSUs2021 will cliff-vest on February 8, 2019,2, 2024 and February 2, 2026, respectively, subject generally to the executive’s continued employment with the Company through such date, and reflect the right to receive between 0% and 300% of the target number of shares underlying the award based on the Company’s level of achievement of the applicable absolute TSR CAGR or Relative TSR CAGR performance metric measured over a minimum three-year performance period (which may be extended in certain circumstances).and five-year performance period, respectively.
As described above, sinceIn determining the granttarget value of and appropriate mix for the 2021 PSUs, the Compensation Committee took into consideration the executive’s performance and potential future contributions, the executive’s overall career experience, peer group analyses, and the risk profile of the Multi-Year PSUs in 2016, we have engaged with, and obtained feedback on our executive compensation program from, 19 of our institutional shareholders. The Company will continue to maintain an active dialogue with shareholders and evaluate feedback on issues of importance to them, and this feedback will be considered in connection withfor the design of our 2019 LTIP.
MSCI INC.2018 PROXY STATEMENT 53
COMPENSATION MATTERS
PSU Award Payoutsexecutive.
The three-year performance periodtable below sets forth the target value for each NEO’s equity awards for 2021. Under SEC disclosure rules, we are required to disclose the accounting value for the RSUs and PSUs awarded on January 27, 2015 concluded on December 31, 2017 and resultedgranted to the NEOs in 2021 in the following levels of achievement“Summary Compensation Table”. As such, the target values reflected in the table below may differ from the amounts set forth in the Summary Compensation Table for such awards for 2021.
Performance Period: 2015-2017 | |||||||||||||||
Performance Metric | Target | Achievement | % of Target | ||||||||||||
Cumulative Revenue (millions) | $ | 3,624.6 | $ | 3,499.9 | 96.6 | % | |||||||||
Cumulative Earnings Per Share(1) | $ | 7.97 | $ | 9.38 | 117.7 | % |
Name | RSUs ($) | 3-YEAR PSUs ($) | 5-YEAR PSUs ($) | |||
Henry A. Fernandez | — | 3,000,000 | 4,500,000 | |||
Andrew C. Wiechmann | 270,000 | 315,000 | 315,000 | |||
C. D. Baer Pettit | — | 1,600,000 | 2,400,000 | |||
Scott A. Crum(1) | 360,000 | 420,000 | 420,000 | |||
Robert J. Gutowski | 270,000 | 315,000 | 315,000 |
(1) | The |
The combined PSU payout3-Year PSUs and 5-Year PSUs reflect the ability to receive between 0% and 300% and 0% and 200%, respectively, of the target number of shares based on achievement of the TSR CAGR performance metric over the applicable performance period.
The table below sets forth the TSR CAGR performance percentage for this award was 146.19% based on the 3-Year PSUs. There will be interpolation (rounded to two decimal places) to derive a TSR CAGR performance percentage that is not expressly set forth in the table below, and any resulting fractional shares will be rounded down to the nearest whole share.
2022 PROXY STATEMENT | 81 |
3-Year PSU TSR CAGR Performance Percentage
TSR CAGR (%) | Performance Percentage (%) | |
≥ 30.0 (maximum) | 300 | |
20.0 | 200 | |
10.0 (target) | 100 | |
9.0 | 50 | |
8.0 (threshold) | 25 | |
< 8.0 | No Vesting |
The table below sets forth the TSR CAGR performance percentage for the 5-Year PSUs. There will be interpolation (rounded to two decimal places) to derive a TSR CAGR performance percentage that is not expressly set forth in the table below, and any resulting fractional shares will be rounded down to the nearest whole share.
5-Year PSU TSR CAGR Performance Percentage
TSR CAGR (%) | Performance Percentage (%) | |
≥ 20.0 (maximum) | 200 | |
15.0 | 150 | |
12.5 (target) | 100 | |
10.0 (threshold) | 50 | |
<10.0 | No Vesting |
The Compensation Committee established the above TSR performance goal percentages applicable to the 3-Year PSUs and the 5-Year PSUs after considering historical 3- and 5-year TSR performance of S&P 500 companies and MSCI’s business projections. The Compensation Committee believes that the applicable threshold, target and maximum goals established for both PSU vehicles in 2021 represent rigorous hurdles that would ultimately deliver significant shareholder value creation if achieved, as evidenced by the fact that achievement of Cumulative Revenue and Cumulative Earnings Per Sharethe TSR performance goals at the threshold performance levels described above. The number ofapplicable to the 2021 3-Year PSUs was then subjectand 5-Year PSUs would translate to further adjustment based on the Company’s three-year ROIC performance. Higher operating incomesubstantial growth in our shareholders’ investments over the three-yearsuch performance period, resultedas reflected in an ROIC multiplierthe chart below.
82 | MSCI | COMPENSATION MATTERS |
2019 PSU award payout percentage is 155.64% of target.AWARD PAYOUTS
The PSU payout percentage reflects adjustments to the target Revenue and Earnings Per Share performance goals for the sale of the Real Estate occupiers business and the acquisition of the business of Insignis, Inc.
The target numbers and the actual numbers of PSUs for the NEOs who received such awards with respect to this performance period are set forth below.
Name | Target No. of PSUs | Actual No. of PSUs | ||||||
Henry A. Fernandez | 36,566 | 56,911 | ||||||
C. D. Baer Pettit | 9,692 | 15,084 | ||||||
Laurent Seyer | 4,582 | 7,131 | ||||||
Scott A. Crum | 6,215 | 9,673 |
The three-year performance period applicable to the first tranchePSUs granted to each of the special one-time PSUs awardedMessrs. Fernandez, Wiechmann, Pettit, Crum and Gutowski on January 27, 2015 to Mr. PettitFebruary 6, 2019 concluded on December 31, 2017,February 5, 2022 and resulted in the following level of achievement:
Performance Period: 2019-2022 | ||||||
Performance Metric | Target | Achievement | % Payout | |||
TSR CAGR | 10.00% | ≥ 30.00% | 300% |
Following the performance adjustment, Mr. Fernandez received 80,187 PSUs, Mr. Wiechmann received 3,021 PSUs, Mr. Pettit received 37,008 PSUs, Mr. Crum received 10,854 PSUs and Mr. Gutowski received 3,021 PSUs, which such PSUs vested and converted to shares on February 7, 2022.
Performance Period: 2015-2017 | |||||||||||||||
Performance Metric | Target | Achievement | % of Target | ||||||||||||
ROIC | 12.95 | % | 14.24 | % | 110.0 | % |
The payout percentage2022 Long-Term Equity Incentive Compensation Program
In order to continue to promote the alignment of executive compensation and long-term shareholder value creation, the Compensation Committee adopted enhancements to the Company’s long-term equity incentive compensation program for 2022, while continuing to place a strong emphasis on maintaining and enhancing our “owner-operator” culture by granting a significant portion of equity incentive awards in the first trancheform of performance-based awards, specifically PSUs and PSOs.
Additional information on our 2022 LTIP is provided in the section titled “Key 2022 Compensation Decisions” on page 61 of this award based on the above level of ROIC achievement was 106.5% based on a target ROIC of 12.95% and achievement of 14.24%. Proxy Statement.
2022 Equity Mix
Vehicle | CEO | President | Other NEOs | |||
RSUs | 0% | 0% | 30% | |||
3-Year PSUs | 50% | 50% | 35% | |||
PSOs | 50% | 50% | 35% |
The PSU payout percentage reflects adjustments totable below sets forth the target ROIC performance goalsvalue for the sale of the Real Estate occupiers business and the acquisition of the business of Insignis, Inc.each NEO’s 2022 annual equity awards:
The target numbers and the actual numbers of PSUs with respect to the first tranche of the special one-time PSU award for Mr. Pettit is set forth below.
Name | Target No. of PSUs | Actual No. of PSUs | ||||||||
Mr. Pettit | 12,221 | 13,015 |
The one-year Adjusted EBITDA goal applicable for Section 162(m) purposes to the special retention RSU award granted to Mr. Seyer on December 16, 2016 was achieved on December 31, 2017 at $659.2 million (in full satisfaction of the $450 million target). As a result, the 24,832 shares underlying Mr. Seyer’s special retention RSU award will vest 100% on December 16, 2019, subject generally to Mr. Seyer’s continued employment with the Company.
Name | RSUs ($) | 3-YEAR PSUs ($) | PSOs ($) | |||
Henry A. Fernandez | — | 5,000,000 | 5,000,000 | |||
Andrew C. Wiechmann | 390,000 | 455,000 | 455,000 | |||
C.D. Baer Pettit | — | 2,750,000 | 2,750,000 | |||
Scott A. Crum | 495,000 | 577,500 | 577,500 | |||
Robert J. Gutowski | 360,000 | 420,000 | 420,000 |
54 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
Benefits
The Company provides health, welfare and other benefits to remain competitive in hiring and retaining its employees. Our NEOs are eligible to participate in these benefit plans on the same terms and conditions as all other employees. We do not provide any special or enhanced benefits to our NEOs.
In the United States and the United Kingdom, the Company has established defined contribution plans for all eligible employees. Contributions by the Company to these defined contribution plans for our NEOs for the applicable period are disclosed in the “All Other Compensation” column in the Summary Compensation Table below.
No Employment Agreements or Perquisites
TheAll of the NEOs are employed “at will.on an “at-will” basis, and the Company does not have any individual employment agreements with the NEOs providing for a fixed duration of employment. As a result, the Company has the flexibility to alter or revise its compensation programs as circumstances dictate.
2022 PROXY STATEMENT | 83 |
Under Mr. Wiechmann’s offer letter with the Company and Mr. Pettit’s employment letter with a subsidiary of the Company, in the event of an involuntary termination of employment without cause, each of Messrs. Wiechmann and Pettit is eligible to receive, subject to his compliance with certain conditions, (i) a lump sum cash payment equal to the sum of his then-current annual base salary plus target annual bonus opportunity and (ii) a prorated cash bonus under the AIP for the year of termination based on actual performance through the date of termination (as of December 31, 2021, assuming 100% achievement of the annual bonus opportunity, such amounts would have equaled $1,700,000 for Mr. Wiechmann and $3,336,097 for Mr. Pettit; the amount for Mr. Pettit is shown as being paid in British pounds sterling and converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.37571 for fiscal 2021).
In addition, we maintain a Change in Control Severance Plan for the benefit of eligible senior executives of the Company (including the NEOs) that provides for severance benefits on a “double-trigger” basis—i.e., in the event of a qualifying termination of the executive’s employment by the Company without “cause” or by the participant for “good reason” in connection with a change in control.
Additional information on post-termination and change in control benefits for our NEOs, assuming a qualifying event occurred as of December 31, 2021, is provided in the section titled “Potential Payments upon Termination or Change in Control,” on page 91 of this Proxy Statement.
No Excessive Perquisites
Based on the Company’s philosophy that its executive compensation program should be straightforward and directly linked to performance, the compensation program for the NEOsdoes notinclude any of the following pay practices:
Information on post-termination and change in control payments to our NEOs as of December 31, 2017 is provided in the section titled “Potential Payments upon Termination or Change in Control,” on page 61 of this Proxy Statement.
In connection with the commencement of her employment in 2016, Ms. Winters entered into an offer letter agreement with the Company. According to the terms of the offer letter, Ms. Winter’s base salary was set at $525,000 per year and she became eligible to receive (i) an annual cash bonus award with a target opportunity of $800,000 and (ii) an annual long-term incentive award with a target opportunity of $1,300,000, granted 60% in the form of PSUs and 40% in the form of RSUs. Ms. Winters also received aone-time $800,000sign-on cash bonus which would be paid in two equal installments within 30 days of each of May 2, 2016 and 2017, respectively. The first installment was paid in May 2016, and the second installment was paid in May 2017.
To ensure competitiveness of compensation structures and pay levels for our NEOs, the Committee conducts an annual review of peer company compensation data. Prior to beginning this review, the Committee examines the composition of such peers to make certain that the selected companies continue to be relevant as evaluated according to the following screening criteria:
The 2017 peer group used to assist in compensation decisions included the following 11 companies:
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During 2017, the Company and Semler Brossy conducted a review of the compensation peer group to ensure that it accurately reflects MSCI’s size, business profile, and talent market. The Committee made the determination to replace Equifax with TransUnion in the Company’s 2018 peer group.
MSCI INC.2018 PROXY STATEMENT 55
COMPENSATION MATTERS
In order to further alignThe Compensation Committee believes that significant stock ownership at the senior-most levels of MSCI’s leadership (e.g., the Executive Committee), which includes our executive officers, aligns management’s interests with those of our senior leadersshareholders and encourages an “owner-operator” mindset. As part of the Compensation Committee’s ongoing assessment of the Company’s compensation policies and practices to ensure furtherance of the goals identified above and for alignment with best practices, effective January 1, 2019, the long-term interests of shareholders, we haveCompensation Committee adopted the rigorous stock ownership guidelines fordetailed below. On January 25, 2022, the membersCompensation Committee further amended the stock ownership guidelines to adopt more rigorous requirements that reflect among the highest multiples of base salary in our peer group, as detailed below. As of the Company’s Executive Committee (compriseddate of 14 senior managers as of March 14, 2018, includingthis Proxy Statement, all of our NEOs). The CEO is expected to hold stock with a value equal to six times his annual base salary. Other Executive Committee members, including our NEOs, regardlessare in compliance with both the pre-2022 Stock Ownership Guidelines and the current Stock Ownership Guidelines. Our CEO significantly exceeds his applicable stock ownership guidelines (see page 100 of whether theythis Proxy Statement for additional details).
Position | Stock Ownership Guidelines (Effective 2022) | Stock Ownership Guidelines (Pre-2022) | ||
Chief Executive Officer | 12x base salary | 6x base salary | ||
President & Chief Operating Officer | 12x base salary | 4x base salary | ||
Other Management Committee Members, including other NEOs | 8x base salary | 3x base salary | ||
Executive Committee | 4x base salary | 3x base salary |
All Executive Committee members are executive officers, are expected to hold stock with a value equal to three times and two times their annual base salaries, respectively.
All covered employees were required to meet the applicable ownership guidelines by December 31, 2017 orunder the current Stock Ownership Guidelines within five years offollowing the date they become a covered employee, whichever is later. Untilof such executive’s appointment to the expected ownership levels are achieved, covered employees are required to hold stock with a value equal to at least 50% of the estimatedafter-tax net proceeds of the aggregate vested equity-based awards they own at the time they become a covered employee and receive while a covered employee.Executive Committee (or, if later, five years from January 1, 2019). For the purpose of determining whether each individual is in compliance with these stock ownership guidelines and requirements, the following are counted towards satisfaction of the minimum ownership requirements:
(1) | shares beneficially owned individually, directly or indirectly; |
(2) | shares beneficially owned jointly with, or separately by, immediate family members residing in the same household, either directly or indirectly; and |
(3) | “Net Shares” underlying unvested RSUs, unvested PSUs (solely to the extent of any award minimum—i.e., any unvested PSUs that are subject to achievement of outstanding performance goals are not counted), “in-the money” vested stock options and any other vested or unvested equity awards (as determined in the Compensation Committee’s discretion). |
84 | MSCI | COMPENSATION MATTERS |
“Net Shares” means the number of shares held directlythat would remain if the shares underlying the equity awards are sold or indirectly, andwithheld by the estimatedafter-tax valueCompany to (i) pay the exercise price of vested ina stock option, (ii) satisfy any tax withholding obligations (assuming a tax rate of 50%) or (iii) satisfy any other applicable transaction costs.
Until the moneyexpected ownership levels are achieved, each Executive Committee member is required to retain 50% of the Net Shares resulting from the vesting, settlement or exercise, as applicable of all stock options, (after exercise cost), unvested RSUs, PSUs or other equity awards granted to such executive.
The Compensation Committee determined that increasing the share ownership multiples for the President and unvested Special PSUs grantedChief Operating Officer and other senior leaders, including our NEOs, better reflected alignment with the broader responsibilities of those roles.
In addition to the minimum ownership requirements, in 2015 (at2022, the 90% threshold level) are considered. All other PSU awards, includingCompensation Committee approved revisions to the Multi-Year PSUs granted in 2016, are excluded from the calculation.
Additionally, Executive Committee members who received Multi-Year PSUs in 2016 are subject to additional share retention requirements for those awards, under which they areof the stock ownership guidelines to provide that until an executive ceases to serve on the Company’s Executive Committee, such executive will be required to holdretain a number of shares representing 50%equivalent to, in the aggregate, 25% of the net shares (after tax) received for“Net Shares” resulting from the vesting, settlement or exercise, as applicable, of all equity incentive awards granted to such executive after January 1, 2022 (or, if later, the date such executive becomes aone-year period after vesting.
As member of the dateExecutive Committee). The Compensation Committee determined that the addition of this Proxy Statement, all25% “Net Shares” holding requirement would further enhance our goal of ourensuring an “owner-operator” mindset among senior leaders. This approach will ensure that a portion of the Net Shares received from every award will be retained while an individual serves on the Executive Committee members are in compliance withCommittee.
In 2019, the Board expanded the Company’s Stock Ownership Guidelines.
To the extent permitted by law, if the Committee determines that all or part of any cash or equity-based incentive compensation was awarded to an executive officer of the Company based on beyond financial results or operating metrics that were achieved as a result of such officer’s willful misconduct or intentional or fraudulent or illegal conduct, or with that officer’s knowledgeconduct. Under the revised Clawback Policy, the Board, acting upon the recommendation of such conduct by another person, then the Compensation Committee, may to the extent permitted by applicable law, recoup any incentive compensation (cash and equity) received by members of the Executive Committee and the Company’s Principal Accounting Officer, in the event of a restatement of financial or other performance-based measures (regardless of whether detrimental conduct has occurred) or in the event that detrimental conduct results in an increased level of performance goal achievement or otherwise causes material financial and/or reputational harm to the Company, as described below.
In the case of a restatement of financial or other performance-based measures, the Board may recover fromup to the officeramount by which the incentive compensation received exceeds the amount that would have been received if the error had not been made within the two years preceding the date on which the Board determines that the financial or other measure contains a material error.
In the case of detrimental conduct that, in the sole discretion of the Board, has resulted in a level of achievement of a performance-based measure or caused material financial or reputational harm to the Company, the Board may recover incentive compensation received by the person during the two-year period immediately preceding the date on which such compensation as it deems appropriate underperson engaged in such detrimental conduct (or the circumstances. This policydate on which the Compensation Committee discovers that such person engaged in detrimental conduct). Detrimental conduct consists of:
● | willful misconduct or breach of a fiduciary duty with respect to the Company or any of its subsidiaries; |
● | conviction of, or having entered a plea bargain or settlement admitting guilt for, any crime of moral turpitude or felony under any applicable law with respect to the Company or any of its subsidiaries; |
● | commission of an act of fraud, embezzlement or misappropriation, with respect to the Company or any of its subsidiaries; |
● | failure to take action with respect to any acts or conduct described above when taken by another person that such person has actual knowledge of or directing any other person to take any of the actions described above; and |
● | breach of any restrictive covenant to which such person is subject contained in any applicable agreement or arrangement with the Company or any of its subsidiaries. |
The expanded Clawback Policy applies to all current and former executive officers who received incentive compensation in respect(cash and equity) granted on or after February 7, 2019. Incentive compensation granted prior to that date remains subject to our prior Clawback Policy.
2022 PROXY STATEMENT | 85 |
Anti-Hedging and PledgingAnti-Pledging Policy
We prohibit all directors and employees, including all NEOs, from hedging or pledging the Company’s common stock or engaging in short sales, purchases or sales of options, puts or calls, as well as derivatives such as swaps, forwards or futures and trading on a short-term basis in the Company’s common stock.
The Compensation Committee takes into consideration the tax implications of our executive compensation program, including with respect to the tax deductibility of compensation paid under Section 162(m) of the IRC.
Section 162(m) of the IRC generally limits the tax deductibility of compensation paid in excess of $1 million to certain of our executive officers during any taxable year. Prior to the enactment of Tax Reform, Section 162(m) of the IRC provided an exception from this deduction limitation for “qualified performance-based compensation”, which we historically relied on by awarding cash and equity incentive compensation to our executive officers under the MSCI Inc. Performance Formula and Incentive Plan and/or the 2016 Omnibus Incentive Plan.
Pursuant to Tax Reform, effective January 1, 2018 for MSCI, the “performance-based compensation” exception under Section 162(m) of the IRC was eliminated. While there is transition relief for compensation paid pursuant to a “written binding contract” in effect on or before November 2, 2017 and not amended thereafter, given that the scope of this transition relief is uncertain, and in the absence of any rulemaking at this time, the full impact of Tax Reform’s changes to Section 162(m) of the IRC on our executive compensation program is not yet known. In light of this uncertainty, the Company continues to maintain the Performance Plan (which the Committee may determine not to use at any time).
56 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
In the exercise of its business judgment, and in accordance with its compensation philosophy, the Compensation Committee continues to have flexibility to award compensation that is not tax deductible if it determines that such award is in our shareholders’ best interests.interests and is necessary to comply with contractual commitments, or to maintain flexibility needed to attract talent, promote retention or recognize and reward desired performance.
The Compensation Committee believes that the design, implementation and governance of our executive compensation program are consistent with high standards of risk management. Our executive compensation program reflects an appropriate mix of compensation elements, balancing current and long-term performance objectives, cash and equity compensation, and risks and rewards.
● | The compensation framework used for making compensation decisions is multi-faceted as it incorporates multiple metrics over varying time periods and is subject to the application of informed judgment by the Compensation Committee. |
● | To further ensure that the interests of our NEOs are aligned with those of our shareholders, a significant portion of executive officer long-term incentive compensation is awarded as equity subject to vesting requirements. Awards typically vest over a multi-year period, and in the case of performance-based awards, vest based on achievement of applicable performance goals at the end of a relevant performance period. |
● | Executive Committee members are required to meet the applicable stock ownership guidelines described under “Stock Ownership Guidelines” on page 83 of this Proxy Statement. |
● | Incentive compensation is subject to the Clawback Policy described under “Clawback Policy” on page 84 of this Proxy Statement. |
Based on these features, we believe our executive compensation program effectively (i) ensures that our compensation opportunities do not encourage excessive risk taking, (ii) keeps our NEOs focused on the creation of long-term, sustainable value for our shareholders and (iii) provides competitive and appropriate levels of compensation over time.
TheIn 2021, the Compensation Committee has reviewed our compensation policies as generally applicable to all of our employees and believes that our policies do not encourage excessive or unnecessary risk-taking and that any level of risk they do encourage is not reasonably likely to have a material adverse effect on the Company. Semler Brossy assisted the Compensation Committee with its review of our compensation program by reviewing materials provided by management related to our compensation program, including the Company’s LTIP. The Compensation Committee also reviewed materials previously prepared by a third partythird-party consultant in 2017 related to certain of the Company’s variable incentive plans, including the AIP, from a risk and governance perspective.
86 | MSCI | COMPENSATION MATTERS |
COMPENSATION & TALENT MANAGEMENT COMMITTEE REPORTCompensation, Talent and Culture Committee Report
We, the Compensation, & Talent Managementand Culture Committee of the Board of Directors of MSCI Inc., have reviewed and discussed with management the Compensation Discussion and Analysis above. Based on this review and these discussions, the Compensation, Talent and Culture Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s 2021 Annual Report on Form10-K for the fiscal year ended December 31, 2017 filed with the Securities and Exchange Commission.
Respectfully submitted,
Benjamin F. duPont (Chair)
Wendy E. Lane
Linda H. Riefler
Patrick Tierney
MSCI INC.2018 PROXY STATEMENT 57
COMPENSATION MATTERS
The following table sets forth information regarding compensation paid or awarded by MSCI to the Company’s NEOs during fiscal years 2017, 2016 and 2015.
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5)(6)(7) | Total ($)(8) | |||||||||||||||||||
Henry A. Fernandez | 2017 | 950,000 | – | – | 1,497,580 | 28,921 | 2,476,501 | |||||||||||||||||||
Chairman and Chief Executive Officer | 2016 | 950,000 | – | 19,734,859 | 1,383,720 | 95,683 | 22,164,262 | |||||||||||||||||||
2015 | 950,000 | – | 3,989,350 | 1,343,791 | 146,787 | 6,429,928 | ||||||||||||||||||||
Kathleen A. Winters | 2017 | 525,000 | 400,000 | 519,982 | 974,390 | 52,375 | 2,471,747 | |||||||||||||||||||
Chief Financial Officer | 2016 | 350,000 | 400,000 | 5,159,888 | 874,480 | 39,290 | 6,823,658 | |||||||||||||||||||
C.D. Baer Pettit | 2017 | 608,254 | – | 399,922 | 1,060,787 | 74,028 | 2,142,991 | |||||||||||||||||||
President | 2016 | 454,762 | – | 5,199,956 | 967,407 | 75,774 | 6,697,899 | |||||||||||||||||||
2015 | 512,799 | – | 3,057,365 | 857,384 | 82,209 | 4,509,757 | ||||||||||||||||||||
Laurent Seyer | 2017 | 608,254 | – | 264,970 | 1,002,715 | 101,947 | 1,977,886 | |||||||||||||||||||
Chief Operating Officer and Chief Client Officer | 2016 | 481,597 | – | 5,545,525 | 812,090 | 60,580 | 6,899,793 | |||||||||||||||||||
2015 | 543,059 | – | 499,896 | 847,015 | 58,076 | 1,948,046 | ||||||||||||||||||||
Scott A. Crum | 2017 | 525,000 | – | 379,912 | 748,790 | 32,797 | 1,686,499 | |||||||||||||||||||
Chief Human Resources Officer |
|
58 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
The following table sets forth information regarding awards granted to our NEOs during fiscal 2017.
2017 Grant of Plan-Based Awards Table
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
| Estimated Future Payouts Under Equity Incentive Plan
| All Other Stock Awards: Number | Grant Date | |||||||||||||||||||||||||||||
Name | Type of | Grant Date | Compensation Committee Action Date | Threshold (#) | Target (#) | Maximum (#) | Threshold (#) | Target (#) | Maximum (#) | of Shares of Stock | Fair Value Awards | |||||||||||||||||||||
Henry A. Fernandez | AIP | – | 2/1/2017 | – | 1,200,000 | 1,800,000 | – | – | – | – | – | |||||||||||||||||||||
Kathleen A. Winters | AIP | – | 2/1/2017 | – | 800,000 | 1,200,000 | – | – | – | – | – | |||||||||||||||||||||
RSU | 2/7/2017 | 2/1/2017 | – | – | – | – | – | – | 5,587 | 519,982 | ||||||||||||||||||||||
C.D. Baer Pettit | AIP | – | 2/1/2017 | – | 850,000 | 1,275,000 | – | – | – | – | – | |||||||||||||||||||||
RSU | 2/7/2017 | 2/1/2017 | – | – | – | – | – | – | 4,297 | 399,922 | ||||||||||||||||||||||
Laurent Seyer | AIP | – | 2/1/2017 | – | 850,000 | 1,275,000 | – | – | – | – | – | |||||||||||||||||||||
RSU | 2/7/2017 | 2/1/2017 | – | – | – | – | – | – | 2,847 | 264,970 | ||||||||||||||||||||||
Scott A. Crum | AIP | – | 2/1/2017 | – | 600,000 | 900,000 | – | – | – | – | – | |||||||||||||||||||||
RSU | 2/7/2017 | 2/1/2017 | – | – | – | – | – | – | 4,082 | 379,912 |
MSCI INC.2018 PROXY STATEMENT 59
COMPENSATION MATTERS
Outstanding Equity Awards at FiscalYear-End
The following table shows the number of shares covered by exercisable and unexercisable stock options and outstanding RSUs and PSUs held by each of our NEOs on December 31, 2017, which units remain subject to forfeiture and cancellation provisions.
Option Awards | Stock Awards | |||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date (mm/dd/yyyy) | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||
Henry A. Fernandez | 49,774 | – | 36.70 | 12/14/2020 | 6,069 | 767,971 | 870,633 | 110,169,900 | ||||||||||||||
Kathleen A. Winters | – | – | – | – | 19,368 | 2,450,827 | 93,510 | 11,832,755 | ||||||||||||||
C.D. Baer Pettit | – | – | – | – | 10,002 | 1,265,653 | 262,989 | 33,278,628 | ||||||||||||||
Laurent Seyer | – | – | – | – | 31,153(5) | 3,942,101 | 156,417 | 19,793,007 | ||||||||||||||
Scott A. Crum | – | – | – | – | 9,005 | 1,139,493 | 84,111 | 10,643,406 |
Number of RSUs and PSUs by Vesting Date | |||||||||||||||||||||||||||||||||||||||||||||
Name | 1/27/18 | 2/7/18 | 2/10/18 | 5/2/18 | 2/7/19 | 2/10/19 | 5/2/19 | 12/16/19 | 2/7/20 | ||||||||||||||||||||||||||||||||||||
Henry A. Fernandez | 6,069 | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
Kathleen A. Winters | – | 1,863 | 2,282 | 3,950 | 1,862 | 2,282 | 5,267 | – | 1,862 | ||||||||||||||||||||||||||||||||||||
C.D. Baer Pettit | 1,608 | 1,433 | 2,049 | – | 1,432 | 2,048 | – | – | 1,432 | ||||||||||||||||||||||||||||||||||||
Laurent Seyer | 760 | 949 | 1,357 | – | 949 | 1,357 | – | 24,832 | 949 | ||||||||||||||||||||||||||||||||||||
Scott A. Crum | 1,031 | 1,361 | 1,946 | – | 1,361 | 1,946 | – | – | 1,360 |
60 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
1/27/2015 Special PSU Award-Unadjusted, subject to forfeiture
Number of Special PSUs at 110% (Maximum) Vesting by Date (#) | 110% | |||||
Name | 12/31/18 | 12/31/19 | ||||
C.D. Baer Pettit
|
13,443
|
13,443
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26,886
|
2016 Multi-Year PSU Award-Unadjusted, subject to forfeiture
Number of PSUs at 300% (Maximum) Vesting (# ) | Total (#) | |||||||||
Non-Full Career Retirement | Full Career Retirement | |||||||||
Name | 2/8/19 | 2/8/19 | ||||||||
Henry A. Fernandez
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580,422
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290,211
|
|
|
870,633
|
| |||
Kathleen A. Winters
|
93,510
|
|
–
|
|
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93,510
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C.D. Baer Pettit
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157,404
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78,699
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|
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236,103
|
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Laurent Seyer
|
156,417
|
|
–
|
|
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156,417
|
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Scott A. Crum
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84,111
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–
|
|
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84,111
|
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Option Exercises and Stock Vested
The following table contains information with regard to stock options exercised by our NEOs and vesting and conversion of restricted stock held by the NEOs during fiscal 2017.
Option Awards | Stock Awards | |||||||
Name | Number of (#) | Value Realized ($) | Number of (#) | Value Realized ($)(1) | ||||
Henry A. Fernandez | – | – | 96,275 | 11,369,289 | ||||
Kathleen A. Winters | – | – | 23,353 | 2,356,131 | ||||
C.D. Baer Pettit | – | – | 40,236 | 5,026,743 | ||||
Laurent Seyer | – | – | 11,544 | 1,393,082 | ||||
Scott A. Crum | – | – | 15,765 | 1,899,330 |
Potential Payments Upon Termination or Change in Control
Change in Control Severance Plan
In the event of a change in control of the Company, select executives, including all of our NEOs, would be entitled to benefits under the MSCI Inc. Change in Control Severance Plan (the “CIC Plan”), which was adopted by the Board of Directors in May 2015. The CIC Plan covers participants identified on a schedule attached to the CIC Plan (subject to any additions to or
MSCI INC.2018 PROXY STATEMENT 61
COMPENSATION MATTERS
removals from the participant list by the Committee), including the Company’s CEO, CFO and the Company’s other NEOs. In the event of a “Qualifying Termination” (as defined in the CIC Plan), participants will receive the severance payments and benefits specified in the CIC Plan. Severance payments and benefits under the CIC Plan are subject to a “double-trigger” as both a change in control and a termination of the participant’s employment by the Company without “cause” or by the participant for “good reason” (as such terms are defined in the CIC Plan) are required in order for the participant to qualify for payments and benefits. The CIC Plan does not include any golden parachute excise taxgross-up provisions. Any severance payments and benefits under the CIC Plan are subject to execution of an agreement by the CIC Plan participant releasing claims against the Company. Participants are also obligated to comply with confidentiality,non-solicitation andnon-disparagement covenants under their release agreement.
Annual Incentive Plan
In the event of a change in control (as defined in the AIP), unless otherwise determined by the Committee, the performance period applicable to any outstanding AIP cash bonus award will cease as of the date immediately prior to the change in control. The portion of any such award based on performance metrics (other than KPIs) will be payable based on the higher of (i) the Company’s actual achievement of the performance metrics (other than KPIs) for the prorated period ending immediately prior to the change in control and (ii) 100%. The portion of any such award based on KPIs will be payable at 100% of the target KPIs. All awards will be payable by the Company (or the successor or survivor entity) within 60 days of the date of the change in control, prorated for the portion of the applicable performance period that elapsed prior to the change in control. If the Company’s successor will not be implementing a comparable annual incentive plan for the remaining portion of the year in which the change in control occurs, the Committee may, in its discretion, elect not to prorate the awards. If any AIP participant is eligible to receive a prorated annual bonus for the year in which the change in control occurs pursuant to any other change in control severance plan, including the CIC Plan, the individual’s prorated annual bonus payable under such other plan will be reduced by the amount of the bonus paid under the AIP.
Equity Acceleration
Terminations Other than due to Death, Disability, Involuntary Termination without Cause, Governmental Service or Full Career Retirement. Upon termination of an NEO’s employment for any reason other than due to death, disability, involuntary termination without cause, governmental service or full career retirement (as such terms are defined in the applicable award agreement), his or her unvested RSUs and PSUs will generally be cancelled immediately. Equity awards granted to NEOs who are eligible for full career retirement are cancelled following a termination for cause.
Death or Disability. Upon termination of an NEO’s employment due to death or “disability” (as defined in the applicable award agreement):
Involuntary Termination. If the Company terminates an NEO’s employment without “cause” (as defined in the applicable award agreement) and he or she signs and does not revoke an agreement and release of claims satisfactory to the Company within 60 days of the termination date:
62 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
Governmental Service. Upon termination of an NEO’s employment as a result of commencing certain employment with a governmental employer (as defined in the applicable award agreement):
Full Career Retirement. Upon termination of an NEO’s employment as a result of “full career retirement” (as defined in the applicable award agreement):
Change in Control. In the event an NEO’s employment is terminated by MSCI without “cause” or by him for “good reason,” in each case, within 24 months following a “change in control” (as such terms are defined in the applicable award agreement):
MSCI INC.2018 PROXY STATEMENT 63
COMPENSATION MATTERS
The following table represents the amounts to which our NEOs or their estates or representatives, as applicable, would have been entitled to receive had their employment been terminated on December 31, 2017 or had a change in control occurred on December 31, 2017.
Termination or Change in Control
Change in Control | ||||||||||||||||||||||||||||||
Name(1) | Involuntary Equity at Target | Termination Equity at Target | Termination Due to Government Service—Equity at Target Performance(1)(4) | Cash Severance(5) | Benefits and Perquisites— COBRA / UK Medical Continuation Premiums(6) | Termination without Cause or for Good Reason (Following a Change in Control)—Equity at Target Performance(1)(7) | ||||||||||||||||||||||||
Henry A. Fernandez(8) | $16,321,382 | $22,571,952 | $24,482,200 | $4,716,727 | $60,819 | $24,482,200 | ||||||||||||||||||||||||
Kathleen A. Winters | $ 5,080,328 | $ 5,956,744 | $ 6,395,079 | $2,898,870 | $67,116 | $ 6,395,079 | ||||||||||||||||||||||||
C.D. Baer Pettit(8) | $ 7,519,007 | $ 9,547,696 | $ 9,732,191 | $3,140,227 | $11,386 | $ 9,732,191 | ||||||||||||||||||||||||
Laurent Seyer | $ 8,340,504 | $10,295,547 | $10,539,770 | $2,991,055 | $11,386 | $10,539,770 | ||||||||||||||||||||||||
Scott A. Crum | $ 3,504,652 | $ 4,588,720 | $ 4,687,295 | $2,452,705 | $42,003 | $ 4,687,295 |
64 MSCI INC.2018 PROXY STATEMENT
COMPENSATION MATTERS
In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of RegulationS-K (which we collectively refer to as the “Pay Ratio Rule”), we are providing the following estimated information for 2017:
Due to SEC disclosure rules, we were required to report the total three-year value of the Multi-Year PSUs granted to our CEO as 2016 compensation in the Summary Compensation Table for 2016, rather than reporting the Multi-Year PSUs on an annualized basis for the years it covers (i.e., reportingone-third of the award value in each of 2016, 2017 and 2018). Accordingly, an alternative way to view our CEO Pay Ratio for 2017 is to include the annualized target value of the CEO’s Multi-Year PSUs that is attributable to 2017 (i.e.,one-third of the target value of the Multi-Year PSUs ) as part of his 2017 annual total compensation, which would result in a CEO Pay Ratio for 2017 of 142 to 1.
SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
Methodology for Identifying Our “Median Employee”
Employee Population
To identify the median of the annual total compensation of all of our employees (other than our Chief Executive Officer), we first identified our total employee population from which we determined our “median employee.” We determined that, as of October 31, 2017, our employee population consisted of approximately 2,910 individuals (of which approximately 25.7% were located in the United States and 74.3% were located in jurisdictions outside the United States). As of December 31, 2017, 59% and 41% of our employees were located in emerging market centers and developed market centers, respectively. Our employee population consisted of our global workforce of full-time, part-time, seasonal and temporary employees, as described in more detail below.
Determining our Median Employee
To identify our “median employee” from our total employee population, we compared the amount of base salary plus actual cash bonus paid for 2017. In making this determination, we annualized the compensation of our full-time employees who were hired in 2017 but did not work for us for the entire fiscal year and permanent part-time employees. We identified our “median employee” using this compensation measure, which was consistently applied to all of our employees included in the calculation.
Our Median Employee
Using the methodologies described above, we determined that our “median employee” was a full-time, salaried employee located in Mumbai, India, with base wages for the12-month period ending December 31, 2017 in the amount of $42,628.
Determination of Annual Total Compensation of our “Median Employee” and our CEO
Once we identified our “median employee”, we then calculated such employee’s annual total compensation for 2017 using the same methodology we used for purposes of determining the annual total compensation of our NEOs for 2017 (as set forth in the Summary Compensation Table for 2017 on page 58 of this Proxy Statement).
MSCI INC.2018 PROXY STATEMENT 65
COMPENSATION MATTERS
ADVISORY VOTETO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY)
The Dodd-Frank Act enables MSCI’s shareholders to vote to approve, on an advisory ornon-binding basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with SEC rules.
For an overview of the compensation of our NEOs, see “Compensation Matters—Compensation Discussion and Analysis—Executive Summary” above.
We are asking for shareholder approval of the compensation of our NEOs as disclosed in this Proxy Statement in accordance with SEC rules, which include the disclosures under “Compensation Matters—Compensation Discussion and Analysis” above, the compensation tables included therein and the narrative following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the policies and practices described in this Proxy Statement.
This vote is advisory and therefore not binding on MSCI, the Committee or the Board. The Board and the Committee value the opinions of MSCI’s shareholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns, and the Committee will evaluate whether any actions are necessary to address those concerns. MSCI currently conducts annual advisory votes on executive compensation.
Vote Required and Recommendation
The affirmative vote of a majority of the votes cast at our 2018 Annual Meeting, at which a quorum is present, is required to approve Proposal No. 2. Abstentions shall not be treated as votes cast.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF MSCI’S NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED “FOR” THIS APPROVAL UNLESS OTHERWISE INSTRUCTED.
66 MSCI INC.2018 PROXY STATEMENT
The following table summarizes the aggregate fees (including related expenses) billed and/or accrued in 2017 and 2016 for professional services provided by PricewaterhouseCoopers LLP (“PwC”). On March 20, 2017, the Audit Committee approved the engagement of PwC as the Company’s independent auditor for 2017. These fees were approved pursuant to thepre-approval policies and procedures described below.
$ in thousands | 2017 | 2016 | ||||||
Audit fees(1) | $ | 2,346 | $ | 2,087 | ||||
Audit-related fees(2) | $ | 89 | $ | 670 | ||||
Tax fees(3) | $ | 1,195 | $ | 2,853 | ||||
All other fees(4) | $ | 175 | $ | – | ||||
Total | $ | 3,805 | $ | 5,610 |
PRE-APPROVAL POLICYOFTHE AUDIT COMMITTEEOF SERVICES PERFORMEDBY INDEPENDENT AUDITORS
The Audit Committee has implementedpre-approval policies and procedures related to the provision of audit andnon-audit services by the independent auditor to ensure that the services do not impair the auditor’s independence. Under these procedures, the Audit Committeepre-approves both the type of services to be provided by the independent auditors and the estimated fees related to those services. During thepre-approval process, the Audit Committee considers the impact of the types of services and the related fees on the independence of the auditor. Even if a service has received generalpre-approval, if it involves a fee in excess of $400,000 or relates to tax planning and advice, it requires a separatepre-approval of the full Audit Committee. The Audit Committee has delegated authority to the Chair of the Audit Committee topre-approve certain engagements not requiring approval by the full Audit Committee. The Chair must report, for informational purposes, anypre-approval decisions to the Audit Committee at its next scheduled meeting. The services and fees must be deemed compatible with the maintenance of the auditor’s independence, including compliance with SEC and NYSE rules and regulations. Management reports the actual fees versuspre-approved amounts periodically throughout the year by category of service.
MSCI INC.2018 PROXY STATEMENT 67
AUDIT MATTERS
The Audit Committee operates under a written charter adopted by the Board. To access this charter, click on the “Corporate Governance” link found on our website’s Investor Relations homepage (http://ir.msci.com ). Information contained on our website is not incorporated by reference into this Proxy Statement or any other report we file with the SEC. The Audit Committee is responsible for the oversight of the integrity of the Company’s consolidated financial statements, the Company’s system of internal control over financial reporting, the Company’s risk management, the qualifications and independence of the Company’s independent registered public accounting firm (“independent auditor”), the performance of the Company’s internal auditor and independent auditor and the Company’s compliance with legal and regulatory requirements. The Audit Committee has the sole authority and responsibility to appoint, compensate, evaluate and, when appropriate, replace the Company’s independent auditor. The Board has determined that all of the Audit Committee’s members are independent under the applicable independence standards of the NYSE and the Exchange Act.
The Audit Committee serves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. Management is responsible for the financial reporting process, including the system of internal controls, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States and for the report on the Company’s internal control over financial reporting. The Company’s independent auditor for the year ended December 31, 2017, PwC, was responsible for auditing the consolidated financial statements included in the Company’s Annual Report on Form10-K, and expressing an opinion as to their conformity with accounting principles generally accepted in the United States of America, and expressing an opinion on the effectiveness of the Company’s internal control over financial reporting, as well as reviewing the Company’s interim condensed consolidated financial statements included in its Quarterly Reports on Form10-Q. The Audit Committee’s responsibility is to oversee the financial reporting process and to review and discuss management’s report on the Company’s internal control over financial reporting. The Audit Committee relies, without independent verification, on the information provided to us and on the representations made by management, the internal auditor and the independent auditor.
The Audit Committee held six meetings during the year ended December 31, 2017. With respect to the year ended December 31, 2017, the Audit Committee, among other things:
The Audit Committee discussed with PwC matters that independent registered public accounting firms are required to discuss with audit committees in accordance with generally accepted auditing standards and standards of the Public Company Accounting Oversight Board, including, among other things, matters related to the conduct of the audit of the Company’s consolidated financial statements and the matters required to be discussed by Auditing Standard No. 16 “Communications with Audit Committees.” This review included discussions by the Audit Committee with management regarding the Company’s consolidated financial statements and with the independent auditor as to the audit thereof, including, among other things, the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the disclosures in the Company’s consolidated financial statements, including the disclosures relating to critical accounting policies.
68 MSCI INC.2018 PROXY STATEMENT
AUDIT MATTERS
PwC also provided to the Audit Committee its annual independence letter required under Rule 3526 of the Public Company Accounting Oversight Board, and represented that it is independent from the Company. We discussed with PwC their independence from the Company, and considered whether the services they provided to the Company beyond those rendered in connection with their integrated audit of the Company’s consolidated financial statements and internal control over financial reporting, and the reviews of the Company’s interim condensed consolidated financial statements included in its Quarterly Reports on Form10-Q, were compatible with maintaining their independence.
During the year ended December 31, 2017, the Audit Committee also received regular updates on the amount of fees and scope of audit, audit-related and tax services provided. Pursuant to thepre-approval policies and procedures related to the provision of audit andnon-audit services by the independent auditors as described above under“—Pre-Approval Policy of the Audit Committee of Services Performed by Independent Auditors,” the Audit Committee approved, among other things, fees related to the integrated audits, statutory audits, consultations, internal control reviews and due diligence services pertaining to business acquisitions. The Audit Committee also approved certain tax fees consisting of compliance and advisory services related to (i) international corporate restructuring, (ii) tax consulting fees related to international and domestic tax matters and (iii) tax compliance assistance.
Based on our review and these meetings, discussions and reports described above, and subject to the limitations on our role and responsibilities referred to above and in the Audit Committee’s charter, we recommended to the Board that the Company’s audited consolidated financial statements for the year ended December 31, 2017 be included in the Company’s Annual Report onForm 10-K.
Respectfully submitted,
Rodolphe M. Vallee (Chair)
Robert G. Ashe
Wayne Edmunds
Marcus L. Smith
2022 PROXY STATEMENT | 87 |
MSCI INC.2018 PROXY STATEMENT 69
AUDIT MATTERS
PROPOSAL NO. 3Executive Compensation Tables
RATIFICATIONOFTHE APPOINTMENTOFSummary Compensation Table
The following table sets forth information regarding compensation paid or awarded by MSCI INCto the Company’s NEOs during fiscal years 2021, 2020 and 2019.
2021 SUMMARY COMPENSATION TABLE
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4)(5)(6)(7) | Total ($) | |||||||
Henry A. Fernandez | 2021 | 1,000,000 | — | 7,499,592 | 1,816,100 | 22,620 | 10,338,312 | |||||||
Chairman and | 2020 | 1,000,000 | — | 7,499,849 | 1,402,210 | 22,080 | 9,924,139 | |||||||
Chief Executive Officer | 2019 | 1,000,000 | — | 6,499,950 | 1,734,320 | 21,690 | 9,255,960 | |||||||
Andrew C. Wiechmann | 2021 | 500,000 | — | 899,268 | 766,330 | 68,780 | 2,234,378 | |||||||
Chief Financial Officer | 2020 | 500,000 | — | 499,836 | 525,970 | 72,364 | 1,598,170 | |||||||
and Treasurer | 2019 | 406,900 | — | 849,669 | 564,850 | 32,643 | 1,854,062 | |||||||
C.D. Baer Pettit | 2021 | 859,819 | — | 3,999,665 | 1,593,746 | 90,215 | 6,543,445 | |||||||
President and | 2020 | 802,253 | — | 3,999,824 | 1,157,080 | 193,394 | 6,152,551 | |||||||
Chief Operating Officer | 2019 | 798,256 | — | 2,999,797 | 1,406,743 | 165,788 | 5,370,583 | |||||||
Scott Crum | 2021 | 550,000 | — | 1,473,932 | 908,050 | 33,857 | 2,965,839 | |||||||
Chief Human Resources Officer | 2020 | 550,000 | — | 1,199,683 | 701,110 | 33,342 | 2,484,135 | |||||||
2019 | 550,000 | — | 1,099,695 | 867,160 | 36,266 | 2,553,121 | ||||||||
Robert J. Gutowski | 2021 | 450,000 | — | 899,268 | 836,268 | 55,823 | 2,241,781 | |||||||
General Counsel | 2020 | 450,000 | — | 399,726 | 475,750 | 61,014 | 1,386,490 |
(1) | Base salary for Mr. Pettit was paid in British pounds sterling and converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.375710, $1.283605 and $1.277209 for fiscal 2021, 2020 and 2019, respectively. Mr. Pettit’s 2021 base salary rate was £625,000. |
(2) | Represents the grant date fair value of awards granted during each fiscal year, as computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, and does not reflect whether the NEO will actually receive a financial benefit from the award. The awards reported in this column were granted in February 2019, February 2020 and February 2021 as part of the annual compensation process. The following table represents the grant date fair value of awards granted during February 2021: |
GRANT DATE FAIR VALUE OF STOCK UNITS GRANTED DURING 2021 ($) | ||||||
Name | RSUs | PSUs | Total | |||
Henry A. Fernandez | — | 7,499,592 | 7,499,592 | |||
Andrew C. Wiechmann | 269,715 | 629,553 | 899,268 | |||
C.D. Baer Pettit | — | 3,999,665 | 3,999,665 | |||
Scott A. Crum | 634,476 | 839,456 | 1,473,932 | |||
Robert J. Gutowski | 269,715 | 629,553 | 899,268 |
The grant date fair value of the PSUs granted to the NEOs during 2021 was calculated based on the probable outcome of the market conditions as of the grant date, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Subtopic 718-10, excluding the effect of estimated forfeitures. The grant date value of the PSUs granted to the NEOs in 2021, assuming the highest level of performance conditions will be achieved (300% for the 3-Year PSUs and 200% for the 5-Year PSUs), is $17,998,840 for Mr. Fernandez, $1,573,767 for Mr. Wiechmann, $9,599,203 for Mr. Pettit, $2,098,599 for Mr. Crum and $1,573,767 for Mr. Gutowski. Information regarding the assumptions used to value these awards is set forth in note 11 to the consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K. | |
(3) | Represents the annual cash bonus paid for 2021, 2020 and 2019, as applicable, (i) under the 2021 AIP in February 2022 with respect to the 2021 performance year, (ii) under the 2020 AIP in February 2021 with respect to the 2020 performance year and (iii) under the 2019 AIP in February 2020 with respect to the 2019 performance year. |
(4) | The Company does not offer defined benefit pension plans or a nonqualified deferred compensation plan to NEOs. |
(5) | The amounts reflected in the “All Other Compensation” column for 2021 include Company matching contributions to the MSCI Inc. 401(k) Retirement Savings Plan of $22,620 for Mr. Fernandez, Mr. Crum, Mr. Wiechmann and Mr. Gutowski. Company contributions to the MSCI Barra Group (UK) Personal Pension Plan for Mr. Pettit in 2021 totaled £62,500 ($85,982). The amount of British pounds sterling was converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.375710, $1.283605 and $1.277209 for fiscal 2021, 2020 and 2019, respectively. |
88 | MSCI | COMPENSATION MATTERS |
(6) | The amount included in the “All Other Compensation” column includes Company matching contributions to the 2021 UK Medical Coverage for Mr. Pettit in 2021 for £4,676 ($6,432). The amount of British pounds sterling was converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.375710. |
(7) | In connection with the Company’s payment of its quarterly cash dividend, the “All Other Compensation” column includes for 2021 the payment to the NEOs of dividend equivalents for outstanding RSUs and, for Messrs. Wiechmann and Gutowski, outstanding 2018 PSUs, as follows: |
2021 DIVIDEND EQUIVALENTS ($)
2018 | Outstanding RSUs | |||||||||||
Name | PSUs | 1Q 2021 | 2Q 2021 | 3Q 2021 | 4Q 2021 | Total | ||||||
Henry A. Fernandez | — | — | — | — | — | — | ||||||
Andrew C. Wiechmann | 31,619 | 3,116 | 3,116 | 4,155 | 4,155 | 46,161 | ||||||
C.D. Baer Pettit | — | 907 | 907 | 1,210 | 1,210 | 4,234 | ||||||
Scott A. Crum | — | 2,485 | 2,485 | 3,313 | 3,313 | 11,596 | ||||||
Robert J. Gutowski | 28,991 | 980 | 980 | 1,306 | 1,306 | 33,563 |
The following table sets forth information regarding awards granted to our NEOs during fiscal 2021.
2021 GRANT OF PLAN-BASED AWARDS TABLE
Compensation | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)(2) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair Value of Stock | |||||||||||||||||||
Name | Type of Award | Grant Date | Committee Action Date | Threshold (#) | Target (#) | Maximum (#) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Awards ($)(7) | ||||||||||||
Henry A. Fernandez | AIP | — | 1/26/2021 | — | 1,400,000 | 2,100,000 | — | — | — | — | — | ||||||||||||
PSU | (4) | 2/3/2021 | 1/26/2021 | — | — | — | — | 7,226 | 21,678 | — | 2,999,657 | ||||||||||||
PSU | (5) | 2/3/2021 | 1/26/2021 | — | — | — | — | 17,420 | 34,840 | — | 4,499,934 | ||||||||||||
Andrew C. Wiechmann | AIP | — | 1/26/2021 | — | 600,000 | 900,000 | — | — | — | — | — | ||||||||||||
RSU | (3) | 2/3/2021 | 1/26/2021 | — | — | — | — | — | — | 647 | 269,715 | ||||||||||||
PSU | (4) | 2/3/2021 | 1/26/2021 | — | — | — | — | 758 | 2,274 | — | 314,661 | ||||||||||||
PSU | (5) | 2/3/2021 | 1/26/2021 | — | — | — | — | 1,219 | 2,438 | — | 314,892 | ||||||||||||
C.D. Baer Pettit(2) | AIP | — | 1/26/2021 | — | 1,238,139 | 1,857,209 | — | — | — | — | — | ||||||||||||
RSU | (3) | 2/3/2021 | 1/26/2021 | — | — | — | — | — | — | — | — | ||||||||||||
PSU | (4) | 2/3/2021 | 1/26/2021 | — | — | — | — | 3,854 | 11,562 | — | 1,599,872 | ||||||||||||
PSU | (5) | 2/3/2021 | 1/26/2021 | — | — | — | — | 9,290 | 18,580 | — | 2,399,793 | ||||||||||||
Scott A. Crum | AIP | — | 1/26/2021 | — | 700,000 | 1,050,000 | — | — | — | — | — | ||||||||||||
RSU | (3) | 2/3/2021 | 1/26/2021 | — | — | — | — | — | — | 863 | 359,759 | ||||||||||||
RSU | (3)(6) | 2/3/2021 | 1/26/2021 | — | — | — | — | — | — | 659 | 274,717 | ||||||||||||
PSU | (4) | 2/3/2021 | 1/26/2021 | — | — | — | — | 1,011 | 3,033 | — | 419,685 | ||||||||||||
PSU | (5) | 2/3/2021 | 1/26/2021 | — | — | — | — | 1,625 | 3,250 | — | 419,770 | ||||||||||||
Robert J. Gutowski | AIP | — | 1/26/2021 | — | 650,000 | 975,000 | — | — | — | — | — | ||||||||||||
RSU | (3) | 2/3/2021 | 1/26/2021 | — | — | — | — | — | — | 647 | 269,715 | ||||||||||||
PSU | (4) | 2/3/2021 | 1/26/2021 | — | — | — | — | 758 | 2,274 | — | 314,661 | ||||||||||||
PSU | (5) | 2/3/2021 | 1/26/2021 | — | — | — | — | 1,219 | 2,438 | — | 314,892 |
(1) | Represents the target and maximum payouts with respect to the AIP for 2021. There are no threshold or minimum payouts under the AIP. For additional information regarding the AIP, see “Compensation Discussion and Analysis–Variable Compensation–Annual Cash Incentives” above. |
(2) | AIP payment for Mr. Pettit was paid in British pounds sterling and converted to U.S. dollars using the 2021 fiscal year average of daily spot rates of £1 to $1.375710. Mr. Pettit’s 2021 AIP payment was £1,238,139. |
2022 PROXY STATEMENT | 89 |
(3) | Represents service vesting RSUs granted during 2021. The RSUs vest in three annual installments of 34%, 33% and 33% on each of the first three anniversaries of the grant date, subject to continued service through each applicable vesting date. |
(4) | Represents 3-Year PSUs granted during 2021, which cliff-vest at the end of a three-year performance cycle from February 2, 2021 to February 1, 2024, based on achievement of a TSR CAGR performance metric and subject to continued service through the last day of the performance period. The actual number of PSUs will be determined at the end of the performance period and may be adjusted down to 0% or up to 300% of the target amount. |
(5) | Represents 5-Year PSUs granted during 2021, which cliff-vest at the end of a five-year performance cycle from February 2, 2021 to February 1, 2026, based on achievement of a TSR CAGR performance metric and subject to continued service through the last day of the performance period. The actual number of PSUs will be determined at the end of the performance period and may be adjusted down to 0% or up to 200% of the target amount. |
(6) | Represents one-time retention RSUs granted to Mr. Crum in early 2021 in recognition of his leadership and dedication supporting our employees during the pandemic. |
(7) | Represents the grant date fair value of stock awards as computed in accordance with FASB ASC Subtopic 718-10. The grant date fair value for these stock awards was based on the closing price of MSCI’s common shares on the trading day preceding the grant date or service inception date as the case may be. For PSUs, the grant date fair value is based on the probable outcome of the performance conditions as of the grant date, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Subtopic 718-10. For the values of these PSUs, assuming attainment of the maximum level of the performance conditions, see footnote 2 to the “Summary Compensation Table” above. |
Outstanding Equity Awards at Fiscal Year-End
The following table shows the number of shares covered by exercisable and unexercisable outstanding RSUs and PSUs held by each of our NEOs on December 31, 2021, which units remain subject to forfeiture and cancellation provisions.
Stock Awards | ||||||||
Name | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or other Rights That Have Not Vested ($)(3) | ||||
Henry A. Fernandez | — | — | 334,619 | 205,017,715 | ||||
Andrew C. Wiechmann | 3,995 | 2,447,697 | 14,347 | 8,790,263 | ||||
C.D. Baer Pettit | 1,163 | 712,558 | 150,524 | 92,224,550 | ||||
Scott A. Crum | 3,186 | 1,952,030 | 35,444 | 21,716,184 | ||||
Robert J. Gutowski | 1,256 | 769,539 | 13,295 | 8,145,714 |
(1) | Represents unvested RSUs outstanding as of December 31, 2021. This column does not give effect to retirement provisions for Messrs. Fernandez and Pettit. Equity awards granted to employees eligible for retirement treatment vest on the date retirement eligibility is attained. Messrs. Fernandez and Pettit became eligible for retirement treatment by satisfying one of the following conditions: age 50 with 12 years as a Managing Director, at age 50 with 15 years as an officer, at least age 55 with 5 years of service (the sum of age plus years of service must equal or exceed 65) or 20 years of service. The number of RSUs included in this table vest on the following dates for each NEO: |
Number of RSUs By Vesting Date | ||||||||||||||
Name | 2/4/22 | 2/6/22 | 2/7/22 | 3/5/22 | 2/4/23 | 2/6/23 | 2/4/24 | |||||||
Henry A. Fernandez | — | — | — | — | — | — | — | |||||||
Andrew C. Wiechmann | 216 | 169 | 339 | 2,671 | 216 | 169 | 215 | |||||||
C.D. Baer Pettit | — | — | 1,163 | — | — | — | — | |||||||
Scott A. Crum | 508 | 406 | 852 | — | 508 | 406 | 506 | |||||||
Robert J. Gutowski | 216 | 135 | 339 | — | 216 | 135 | 215 |
(2) | The market value of outstanding RSUs is based on a share price of $612.69, the closing price of MSCI Inc. common stock on December 31, 2021, rounded to the nearest whole number. |
(3) | Represents outstanding and unvested PSUs held on December 31, 2021 that remain subject to performance adjustment and forfeiture provisions, as illustrated in the following tables. This column does not give effect to retirement provisions for Messrs. Fernandez and Pettit. These numbers represent PSUs each NEO would receive upon vesting, assuming maximum attainment of the applicable performance goals. |
90 | MSCI | COMPENSATION MATTERS |
2019, 2020 and 2021 PSU Awards, subject to forfeiture and cancellation provisions
2019—3-Year PSU Award-Unadjusted, subject to forfeiture and cancellation provisions
Name | Number of PSUs at 300% (Maximum) Vesting | |
Henry A. Fernandez(1) | 80,187 | |
Andrew C. Wiechmann(2) | 3,021 | |
C.D. Baer Pettit(3) | 37,008 | |
Scott A. Crum(4) | 10,854 | |
Robert J. Gutowski(5) | 3,021 |
(1) | Following the performance adjustment, Mr. Fernandez received 80,187 PSUs which vested and converted to shares on February 7, 2022. |
(2) | Following the performance adjustment, Mr. Wiechmann received 3,021 PSUs which vested and converted to shares on February 7, 2022. |
(3) | Following the performance adjustment, Mr. Pettit received 37,008 PSUs which vested and converted to shares on February 7, 2022. |
(4) | Following the performance adjustment, Mr. Crum received 10,854 PSUs which vested and converted to shares on February 7, 2022. |
(5) | Following the performance adjustment, Mr. Gutowski received 3,021 PSUs which vested and converted to shares on February 7, 2022. |
2019—5-Year PSU Award-Unadjusted, subject to forfeiture and cancellation provisions
Name | Number of PSUs at 200% (Maximum) Vesting | |
Henry A. Fernandez | 84,022 | |
Andrew C. Wiechmann | 1,356 | |
C.D. Baer Pettit | 23,266 | |
Scott A. Crum | 5,686 | |
Robert J. Gutowski | 1,356 | |
2020—3-Year PSU Award-Unadjusted, subject to forfeiture and cancellation provisions | ||
Name | Number of PSUs at 300% (Maximum) Vesting | |
Henry A. Fernandez | 42,708 | |
Andrew C. Wiechmann | 2,490 | |
C.D. Baer Pettit | 28,470 | |
Scott A. Crum | 5,979 | |
Robert J. Gutowski | 1,992 | |
2020—5-Year PSU Award-Unadjusted, subject to forfeiture and cancellation provisions | ||
Name | Number of PSUs at 200% (Maximum) Vesting | |
Henry A. Fernandez | 71,184 | |
Andrew C. Wiechmann | 2,768 | |
C.D. Baer Pettit | 31,638 | |
Scott A. Crum | 6,642 | |
Robert J. Gutowski | 2,214 | |
2021—3-Year PSU Award-Unadjusted, subject to forfeiture and cancellation provisions | ||
Name | Number of PSUs at 300% (Maximum) Vesting | |
Henry A. Fernandez | 21,678 | |
Andrew C. Wiechmann | 2,274 | |
C.D. Baer Pettit | 11,562 | |
Scott A. Crum | 3,033 | |
Robert J. Gutowski | 2,274 |
2022 PROXY STATEMENT | 91 |
2021—5-Year PSU Award-Unadjusted, subject to forfeiture and cancellation provisions
Name | Number of PSUs at 200% (Maximum) Vesting | |
Henry A. Fernandez | 34,840 | |
Andrew C. Wiechmann | 2,438 | |
C.D. Baer Pettit | 18,580 | |
Scott A. Crum | 3,250 | |
Robert J. Gutowski | 2,438 |
Option Exercises and Stock Vested
The following table contains information with regard to stock options exercised by our NEOs and vesting and conversion of restricted stock held by the NEOs during fiscal 2021.
Option Awards | Stock Awards | |||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||
Henry A. Fernandez | — | — | — | — | ||||
Andrew C. Wiechmann | — | — | 5,173 | 2,223,407 | ||||
C.D. Baer Pettit | — | — | 2,391 | 999,366 | ||||
Scott A. Crum | — | — | 2,193 | 942,573 | ||||
Robert J. Gutowski | — | — | 4,751 | 2,042,027 |
(1) | The value realized for stock awards is based on the closing price of MSCI common stock on the stock vesting date. |
Potential Payments Upon Termination or Change in Control
Change in Control Severance Plan
In the event of a change in control of the Company, Executive Committee members, including all of our NEOs, would be entitled to benefits under the MSCI Inc. Change in Control Severance Plan (the “CIC Plan”), which was adopted by the Board of Directors in May 2015. The CIC Plan covers participants identified on a schedule attached to the CIC Plan (subject to any additions to or removals from the participant list by the Compensation Committee), including the Company’s CEO, CFO and the Company’s other NEOs. In the event of a “Qualifying Termination” (for certain terminations related to changes in control, as defined in the CIC Plan), participants will receive the severance payments and benefits specified in the CIC Plan. Severance payments and benefits under the CIC Plan are subject to a “double-trigger” as both a change in control and a termination of the participant’s employment by the Company without “cause” or by the participant for “good reason” (as such terms are defined in the CIC Plan) are required in order for the participant to qualify for payments and benefits. The CIC Plan does not include any golden parachute excise tax gross-up provisions. Any severance payments and benefits under the CIC Plan are subject to execution of an agreement by the CIC Plan participant releasing claims against the Company. Participants are also obligated to comply with confidentiality, non-solicitation and non-disparagement covenants under their release agreement.
Annual Incentive Plan
In the event of a change in control (as defined in the AIP), unless otherwise determined by the Compensation Committee, the performance period applicable to any outstanding AIP cash bonus award will cease as of the date immediately prior to the change in control. The portion of any such award based on performance metrics (other than KPIs) will be payable based on the higher of (i) the Company’s actual achievement of the performance metrics (other than KPIs) for the prorated period ending immediately prior to the change in control and (ii) 100%.’S INDEPENDENT AUDITOR The portion of any such award based on KPIs will be payable at 100% of the target KPIs. All awards will be payable by the Company (or the successor or survivor entity) within 60 days of the date of the change in control, prorated for the portion of the applicable performance period that elapsed prior to the change in control.
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If the Company’s successor will not be implementing a comparable annual incentive plan for the remaining portion of the year in which the change in control occurs, the Compensation Committee may, in its discretion, elect not to prorate the awards. If any AIP participant is eligible to receive a prorated annual bonus for the year in which the change in control occurs pursuant to any other change in control severance plan, including the CIC Plan, the individual’s prorated annual bonus payable under such other plan will be reduced by the amount of the bonus paid under the AIP.
Offer Letters
For information regarding certain amounts payable to each of Messrs. Wiechmann and Pettit in connection with an involuntary termination of employment other than for cause pursuant to the terms of their offer letter or employment letter, respectively, please see “Employment Agreements” on page 82 of this Proxy Statement.
Equity Acceleration
The descriptions of equity acceleration provisions below apply to the applicable outstanding equity awards as of December 31, 2021.
TERMINATIONS OTHER THAN DUE TO DEATH, DISABILITY, INVOLUNTARY TERMINATION WITHOUT CAUSE, GOVERNMENTAL SERVICE OR RETIREMENT
Upon termination of an NEO’s employment for any reason other than due to death, disability, involuntary termination without cause, certain governmental service or retirement (as such terms are defined in the applicable award agreement), his or her unvested RSUs and PSUs will generally be cancelled immediately. Equity awards granted to NEOs who are eligible for retirement treatment are cancelled following a termination for cause.
DEATH OR DISABILITY
Upon termination of an NEO’s employment due to death or “disability” (as defined in the applicable award agreement):
● | RSUs. RSUs will vest and convert into shares within 30 days of the termination date. |
● | 2019-2021 PSUs. PSUs will vest and convert into shares on the adjustment date, subject to adjustment based on actual performance through the end of the performance period. |
INVOLUNTARY TERMINATION
If the Company terminates an NEO’s employment without “cause” (as defined in the applicable award agreement) and he or she signs and does not revoke an agreement and release of claims satisfactory to the Company within 60 days of the termination date:
● | 2019 RSUs. If the NEO is not eligible for retirement treatment as of the termination date, RSUs will vest and convert into shares within 60 days of the termination date. If the NEO is eligible for retirement treatment, RSUs will vest and convert into shares at any time, determined in the discretion of the Compensation Committee, during the period commencing on January 1 of the year following the year of termination and ending on the one-year anniversary of the termination date (or, 15 days following the expiration of any non-compete the NEO is subject to, if earlier), but in no event before January 1 of the year following the year of termination. |
● | 2020-2021 RSUs. A prorated portion of the RSUs will vest and convert to shares on the next regularly scheduled vesting date equal to the product of (i) one-third of the total number of RSUs granted pursuant to the award multiplied by (ii) a fraction, (A) the numerator of which is the total number of months the NEO was employed by the Company during the applicable 12-month vesting period (rounded up to the next whole month) and (B) the denominator of which is 12 months. However, for NEOs who have achieved “62/10 Retirement Eligibility” (as defined in the applicable award agreement), the RSUs will fully vest on the date of termination and will convert to shares on the original payment schedule. |
● | 2019 PSUs. PSUs will service-vest and convert into shares on the adjustment date, subject to adjustment based on actual performance through the end of the performance period. |
● | 2020-2021 3-Year PSUs. A prorated portion of the target number of PSUs will vest and convert into shares on the adjustment |
2022 PROXY STATEMENT | 93 |
date equal to the product of (i) the target number of PSUs multiplied by (ii) a fraction, (A) the numerator of which is the total number of months the NEO was employed by the Company during the 3-year performance period (rounded up to the next whole month), and (B) the denominator of which is 36 months, subject to adjustment based on actual performance through the end of the performance period. However, for NEOs who have achieved “62/10 Retirement Eligibility,” all of the target PSUs (i.e., not prorated) will vest and convert into shares on the adjustment date, subject to adjustment based on actual performance through the end of the performance period. | |
● | 2020-2021 5-Year PSUs. If the termination of employment occurs prior to the second anniversary of the grant date, the PSUs will be forfeited in their entirety. Following the second anniversary of the grant date, a prorated portion of the target number of PSUs will vest and convert into shares on the adjustment date equal to the product of (i) the target number of PSUs multiplied by (ii) a fraction, (A) the numerator of which is the total number of months the NEO was employed by the Company during the 5-year performance period (rounded up to the next whole month), and (B) the denominator of which is 60 months, subject to adjustment based on actual performance through the end of the performance period. However, for NEOs who have achieved “62/10 Retirement Eligibility,” all of the target PSUs (i.e., not prorated) will vest and convert into shares on the adjustment date, subject to adjustment based on actual performance through the end of the performance period. |
GOVERNMENTAL SERVICE
Upon termination of an NEO’s employment as a result of commencing certain employment with a governmental employer (as defined in the applicable award agreement):
● | 2019 RSUs. The RSUs will vest and convert into shares on the termination date or within 60 days thereafter. |
● | 2019 PSUs. If such termination occurs prior to the adjustment date, the PSUs will be adjusted within a range based on the expected (or actual, if such termination occurs after the end of the performance period) achievement of the performance metrics for the performance period (which will be determined by extrapolating the performance metrics that have been achieved as of the end of the most recent fiscal quarter prior to the date on which the NEO’s employment terminates) and such adjusted PSUs will vest and convert into shares within 60 days following the termination date. If such termination occurs following the adjustment date, the PSUs will fully vest and convert into shares within 60 days of termination. |
RETIREMENT
Upon termination of an NEO’s employment in circumstances that makes him or her eligible for retirement treatment (based on the applicable award agreement):
● | 2019 RSUs. RSUs will vest and convert into shares at any time, determined in the discretion of the Compensation Committee, during the period commencing on January 1 of the year following the year of termination and ending on the one-year anniversary of the termination date (or, 15 days following the expiration of any non-compete the NEO is subject to, if earlier), but in no event before January 1 of the year following the year of termination. |
● | 2020-2021 RSUs. For NEOs who have achieved “Legacy Retirement Eligibility” or “55/10 Retirement Eligibility” (as such terms are defined in the applicable award agreement) but who have not achieved “62/10 Retirement Eligibility,” a prorated portion of the RSUs will vest and convert to shares on the next regularly scheduled vesting date equal to the product of (i) one-third of the total number of RSUs granted pursuant to the award multiplied by (ii) a fraction, (A) the numerator of which is the total number of months the NEO was employed by the Company during the applicable 12-month vesting period (rounded up to the next whole month) and (B) the denominator of which is 12 months. For NEOs who have achieved “62/10 Retirement Eligibility,” the RSUs will fully vest on the date of termination and will convert to shares on the original payment schedule. |
● | 2019 PSUs. If retirement eligibility occurs prior to or on the vesting date, the PSUs will vest and convert into shares on the adjustment date, subject to adjustment based on actual performance through the end of the performance period; except that, if on the adjustment date, the NEO is subject to a non-compete restriction, the PSUs will convert, in the discretion of the Compensation Committee, during the period (x) commencing on the adjustment date and (y) ending on December 31, 2022 or December 31, 2023, as applicable. If such termination occurs after the vesting date (but prior to the adjustment date), the adjusted PSUs will convert into shares on December 31, 2022 or December 31, 2023, as applicable. |
● | 2020-2021 PSUs. For NEOs who have achieved “Legacy Retirement Eligibility” or “55/10 Retirement Eligibility” but who have not achieved “62/10 Retirement Eligibility,” a prorated portion of the target number of PSUs will vest and convert to shares on the adjustment date equal to the product of (i) the target number of PSUs multiplied by (ii) a fraction, (A) the numerator |
94 | MSCI | COMPENSATION MATTERS |
of which is the total number of months the NEO was employed by the Company during the 3- or 5-year performance period, as applicable (rounded up to the next whole month), and (B) the denominator of which is 36 or 60 months, as applicable, subject to adjustment based on actual performance through the end of the performance period. However, for NEOs who have achieved “62/10 Retirement Eligibility,” all of the target PSUs (i.e., not prorated) will vest and convert into shares on the adjustment date, subject to adjustment based on actual performance through the end of the performance period. |
CHANGE IN CONTROL
In the event an NEO’s employment is terminated by MSCI without “cause” or by him or her for “good reason,” in each case, within 24 months following a “change in control” (as such terms are defined in the applicable award agreement):
● | RSUs. RSUs will vest and convert into shares within 60 days of the date of termination of employment. |
● | 2019-2021 PSUs. PSUs will vest and convert to shares within 60 days of the date of termination of employment, and the performance metrics will be deemed to have been achieved at the greater of (i) the actual achievement of the performance metrics for the period commencing on the first day of the performance period and ending on the date immediately prior to the change in control and (ii) 100%. |
The following table represents the amounts to which our NEOs or their estates or representatives, as applicable, would have been entitled to receive had their employment been terminated on December 31, 2021 or had a change in control occurred on December 31, 2021.
Termination or Change in Control
Change in Control | ||||||||||||||||||
Name(1) | Involuntary Termination Without Cause- Equity at Target Performance(1)(2) | Termination Due to Death, Disability- Equity at Target Performance(1)(3) | Termination Due to Government Service - Equity at Target Performance(1)(4) | Cash Severance(5) | Benefits and Perquisites - Cobra / UK Medical Continuation Premiums(6) | Termination Without Cause or for Good Reason (Following a Change in Control)- Equity at Target Performance(1)(7) | ||||||||||||
Henry A. Fernandez | $ | 87,745,786 | $ | 87,745,786 | $ | 87,745,786 | $ | 5,301,752 | $ | 72,354 | $ | 87,745,786 | ||||||
Andrew C. Wiechmann | $ | 3,258,898 | $ | 6,047,863 | $ | 6,047,863 | $ | 2,238,100 | $ | — | $ | 6,047,863 | ||||||
C.D. Baer Pettit | $ | 16,594,096 | $ | 38,957,894 | $ | 38,957,894 | $ | 4,320,918 | $ | 17,367 | $ | 38,957,894 | ||||||
Scott A. Crum | $ | 5,130,666 | $ | 10,781,506 | $ | 10,781,506 | $ | 2,750,880 | $ | 84,391 | $ | 10,781,506 | ||||||
Robert J. Gutowski | $ | 1,629,755 | $ | 4,098,283 | $ | 4,098,283 | $ | 2,078,900 | $ | 72,354 | $ | 4,098,283 |
(1) | All values are based on a closing stock price of $612.69 per share as of December 31, 2021. The amounts included in this table also represent values associated with the acceleration of the 2019 PSUs for the NEOs, which vested on February 7, 2022. As such, as of the date of this proxy statement, the value attributable to the 2019 PSUs reflected in the table above for Messrs. Fernandez ($49,129,773), Wiechmann ($1,850,936), Pettit ($22,674,432), Crum ($6,650,137) and Gutowski ($1,850,936) are no longer currently applicable in the event of any future termination of employment or change in control. |
(2) | These amounts represent the values associated with the acceleration of unvested RSUs and payout of PSUs at the target performance level upon a termination of the NEO’s employment due to an involuntary termination without cause (not following a change in control), in each case, pursuant to the terms of the applicable award agreement. The value associated with the acceleration of unvested RSUs and PSUs (assuming payout at the maximum performance level) is $205,017,715 for Mr. Fernandez, $5,633,072 for Mr. Wiechmann, $44,318,931 for Mr. Pettit, $12,393,493 for Mr. Crum and $3,874,039 for Mr. Gutowski. |
(3) | These amounts represent the values associated with the acceleration of unvested RSUs and payout of PSUs at the target performance level upon a termination of the NEO’s employment due to death or disability, in each case, pursuant to the terms of the applicable award agreement. The value associated with the acceleration of unvested RSUs and PSUs (assuming payout at the maximum performance level) is $205,017,715 for Mr. Fernandez, $11,237,960 for Mr. Wiechmann, $92,937,108 for Mr. Pettit, $23,668,215 for Mr. Crum and $8,915,252 for Mr. Gutowski. |
(4) | These amounts represent the values associated with the acceleration of unvested RSUs and payout of PSUs at the target performance level upon a termination of the NEO’s employment due to a termination for government service pursuant to the terms of the applicable award agreement. The value associated with the acceleration of unvested RSUs and PSUs (assuming payout at the maximum performance level) is $205,017,715 for Mr. Fernandez, $11,237,960 for Mr. Wiechmann, $92,937,108 for Mr. Pettit, $23,668,215 for Mr. Crum and $8,915,252 for Mr. Gutowski. |
(5) | A lump sum cash payment under our CIC Plan equal to the sum of (1) two times the participant’s base salary and (2) two times the participant’s average annual cash bonus (three-year average annual cash bonus). For more information on our CIC Plan and qualifying terminations of employment thereunder, see “Compensation Discussion and Analysis—Potential Payments Upon Termination or Change in Control—Change in Control Severance Plan” above. |
2022 PROXY STATEMENT | 95 |
(6) | A lump sum cash payment under our CIC Plan equal to 135% of the approximate amount of COBRA continuation premiums for the participant and his or her eligible dependents for 24 months for the coverage option and level of medical, dental and/or vision coverage in effect for the participant immediately prior to the date of termination (or, in the case of an international participant, equivalent local private medical benefits); provided, however, that such continued participation shall only be provided to an international participant to the extent permitted under the terms of any applicable group health plan and applicable law. For more information on our CIC Plan and qualifying terminations of employment thereunder, see “Compensation Discussion and Analysis—Potential Payments Upon Termination or Change in Control—Change in Control Severance Plan” above. |
(7) | These amounts represent the values associated with the acceleration of unvested RSUs and payout of PSUs at the target performance level upon a termination of the NEO’s employment by the Company without cause or by the NEO for good reason, in each case, within 24 months following a change in control, pursuant to the terms of the applicable award agreement. The value associated with the acceleration of unvested RSUs and PSUs (assuming payout at the maximum performance level) is $205,017,715 for Mr. Fernandez, $11,237,960 for Mr. Wiechmann, $92,937,108 for Mr. Pettit, $23,668,215 for Mr. Crum and $8,915,252 for Mr. Gutowski. |
In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K (which we collectively refer to as the “Pay Ratio Rule”), we are providing the following estimated information for 2021:
● | the median of the annual total compensation of all our employees (except our Chief Executive Officer) was $58,415; |
● | the annual total compensation of our Chief Executive Officer was $10,338,312; and |
● | the ratio of these two amounts was 177 to 1. We believe that this ratio is a reasonable estimate calculated in a manner consistent with the requirements of the Pay Ratio Rule. |
SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
Methodology for Identifying our “Median Employee”
EMPLOYEE POPULATION
To identify the median of the annual total compensation of all our employees (other than our Chief Executive Officer), we first identified our total employee population from which we determined our “median employee.” We determined that, as of December 31, 2021, our employee population consisted of 4,303 individuals (of which 47.4% of MSCI employees were located in the Asia Pacific region, 23.3% in Europe, Middle East and Africa, 20.6% in the U.S. and Canada, and 8.7% in Mexico and Brazil). Our employee population consisted of our global workforce of full-time, part-time, seasonal and temporary employees, as described in more detail below.
DETERMINING OUR MEDIAN EMPLOYEE
To identify our “median employee” from our total employee population, we compared the amount of base salary plus actual cash bonus paid for 2021. In making this determination, we annualized the compensation of our full-time employees who were hired in 2021 but did not work for us for the entire fiscal year and permanent part-time employees. We identified our “median employee” using this compensation measure, which was consistently applied to all our employees included in the calculation.
OUR MEDIAN EMPLOYEE
Using the methodologies described above, we determined that our “median employee” was a full-time, salaried employee located in Mumbai, India, with base salary for the 12-month period ending December 31, 2021 in the amount of $41,580.
Determination of Annual Total Compensation of our “Median Employee” and our CEO
Once we identified our “median employee,” we then calculated such employee’s annual total compensation for 2021 using the same methodology we used for purposes of determining the annual total compensation of our NEOs for 2021 (as set forth in the Summary Compensation Table for 2021 on page 87 of this Proxy Statement).
96 | MSCI |
The following table summarizes the aggregate fees (including related expenses) billed and/or accrued in 2021 and 2020 for professional services provided by PwC. On March 15, 2021, the Audit and Risk Committee approved the engagement of PwC as the Company’s independent auditor for 2021. These fees were approved pursuant to the pre-approval policies and procedures described below.
$ IN THOUSANDS | 2021 | 2020 | |
Audit fees(1) | 3,396 | 3,120 | |
Audit-related fees(2) | 698 | 15 | |
Tax fees(3) | 1,329 | 1,607 | |
All other fees(4) | 16 | 6 | |
Total | 5,439 | 4,748 |
(1) | Audit fees consisted of fees billed and/or accrued for (i) audits of our consolidated financial statements included in our Annual Reports on Form 10-K and related services, (ii) reviews of the interim condensed consolidated financial statements included in our quarterly financial statements, (iii) audits of various entities for statutory and other reporting requirements, (iv) comfort letters, consents and other services related to SEC and other regulatory filings and (v) audits of our internal control over financial reporting (as required by Section 404 of the Sarbanes-Oxley Act of 2002). |
(2) | In 2021 and 2020, Audit-related fees consisted of fees billed and/or accrued for the annual benefit plan audit as well as other assurance and related services. |
(3) | Tax fees related to tax compliance assistance in 2021 and 2020 were $1,043,596 and $1,409,000, respectively. Tax consulting fees related to international and domestic tax matters, including international tax planning, in 2021 and 2020 were approximately $285,431 and $198,000, respectively. |
(4) | In 2021 and 2020, all other fees primarily consisted of fees related to accounting research software subscriptions. |
Pre-Approval Policy of the Audit and Risk Committee of Services Performed by Independent Auditors
The Audit and Risk Committee has implemented pre-approval policies and procedures related to the provision of audit and non-audit services by the independent auditor to ensure the services do not impair their independence. Under these procedures, the Audit and Risk Committee pre-approves both the type of services to be provided by the independent auditors and the estimated fees related to those services. During the pre -approval process, the Audit and Risk Committee considers the impact of the types of services and the related fees on the independence of the auditor. Even if a service has received general pre-approval, if it involves a fee in excess of $750,000 or relates to tax planning and advice, it requires a separate pre-approval of the full Audit and Risk Committee. The Audit and Risk Committee has delegated authority to the Chair of the Audit and Risk Committee to pre-approve certain engagements not requiring approval by the full Audit and Risk Committee. The Chair must report, for informational purposes, any pre-approval decisions to the Audit and Risk Committee at its next scheduled meeting. The services and fees must be deemed compatible with the maintenance of the auditor’s independence, including compliance with SEC rules and regulations. Management reports the actual fees versus pre-approved amounts periodically throughout the year by category of service.
2022 PROXY STATEMENT | 97 |
Audit and Risk Committee Report
The Audit and Risk Committee appointed PricewaterhouseCoopers LLP (“PwC”) as independent auditorsoperates under a written charter adopted by the Board, which is accessible through the “Corporate Governance” link under the “Investor Resources” tab found on our website’s Investor Relations homepage (https://ir.msci.com). The Audit and Risk Committee is responsible for 2018 and presents this selection to the shareholders for ratification. PwC will audit ouroversight of the integrity of the Company’s consolidated financial statements, for 2018the Company’s system of internal control over financial reporting, the Company’s risk management, the qualifications and perform other permissiblepre-approved services.
A PwC representative will attendindependence of the 2018 Annual MeetingCompany’s independent auditor, the performance of the Company’s internal and independent auditors and the Company’s compliance with legal and regulatory requirements. The Audit and Risk Committee has the sole authority and responsibility to respond to your questionsappoint, compensate, evaluate and, will havewhen appropriate, replace the opportunity to make a statement if he or she desires to do so. If shareholders do not ratify the appointment,Company’s independent auditor. The Board has determined that all of the Audit Committee will reconsider it.and Risk Committee’s members are independent under the applicable independence standards of the NYSE and the Exchange Act.
The Audit and Risk Committee periodically reviews the engagementserves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. Management is responsible for the financial reporting process, including the system of internal controls, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States and for the report on the Company’s internal control over financial reporting. The Company’s independent auditor for the year ended December 31, 2021, PwC, was responsible for auditing the consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K, expressing an opinion as to assess,their conformity with accounting principles generally accepted in the United States of America and expressing an opinion on the effectiveness of the Company’s internal control over financial reporting, as well as reviewing the Company’s interim condensed consolidated financial statements included in its Quarterly Reports on Form 10-Q. The Audit and Risk Committee’s responsibility is to oversee the financial reporting process and to review and discuss management’s report on the Company’s internal control over financial reporting. The Audit and Risk Committee relies, without independent verification, on the information provided to us and on the representations made by management, the internal auditor and the independent auditor.
The Audit and Risk Committee held ten meetings during the year ended December 31, 2021, and among other things,things:
● | reviewed and discussed the Company’s quarterly and annual earnings releases; |
● | reviewed and discussed the (i) quarterly unaudited consolidated financial statements and related notes and (ii) audited consolidated financial statements and related notes to the consolidated financial statements for the year ended December 31, 2021 with management and PwC; |
● | reviewed and discussed the annual plan and scope of work of the independent auditor; |
● | reviewed and discussed the annual plan and scope of work of the internal auditor and summaries of significant reports to management by the internal auditor; |
● | met with PwC, the internal auditor and Company management in executive sessions to discuss the results of their examinations and evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs; |
● | reviewed and discussed the critical accounting policies set forth in the Company’s Annual Report on Form 10-K and reviewed critical audit matters reported by PwC; |
● | reviewed business and financial market conditions, including periodic assessments of risks posed to MSCI’s operations and financial condition (including those related to technology and cybersecurity); and |
● | evaluated the performance of PwC and approved their engagement as the Company’s independent auditor. |
PwC also provided to the skills, experience, service levelsAudit and costs associatedRisk Committee the written disclosures and the letters required by the applicable PCAOB requirements regarding PwC’s communications with conducting the annualAudit and Risk Committee concerning independence, and represented that it is independent from the Company. We discussed with PwC their independence from the Company, and considered whether the services they provided to the Company beyond those rendered in connection with their integrated audit of the Company’s consolidated financial statements.statements and internal control over financial reporting, and the reviews of the Company’s interim condensed consolidated financial statements included in its Quarterly Reports on Form 10-Q, were compatible with maintaining their independence.
98 | MSCI | AUDIT MATTERS |
During the year ended December 31, 2021, the Audit and Risk Committee also received regular updates on the amount of fees and scope of audit, audit-related and tax services provided. Pursuant to the pre-approval policies and procedures related to the provision of audit and non-audit services by the independent auditors as described above within “—Pre-Approval Policy of the Audit and Risk Committee of Services Performed by Independent Auditors,” the Audit and Risk Committee approved, among other things, fees related to the integrated audits, statutory audits, consultations and certain non-audit services. The Audit and Risk Committee also approved certain tax fees consisting of compliance and advisory services related to (i) tax consulting fees related to international and domestic tax matters, including international corporate restructurings, and (ii) tax compliance assistance.
Based on our review and these meetings, discussions and reports described above, and subject to the limitations on our role and responsibilities referred to above and in the Audit and Risk Committee’s charter, we recommended to the Board that the Company’s audited consolidated financial statements be included in the Company’s 2021 Annual Report on Form 10-K.
Respectfully submitted,
Vote RequiredWayne Edmunds (Chair)
Robert G. Ashe
Sandy C. Rattray
Linda H. Riefler
Rajat Taneja
2022 PROXY STATEMENT | 99 |
Ratification of the Appointment of MSCI Independent Auditor
The Audit and Risk Committee appointed PricewaterhouseCoopers LLP (“PwC”) as independent auditors for 2022 and presents this selection to the shareholders for ratification. PwC will audit our consolidated financial statements for the year ended December 31, 2022 and perform other permissible pre-approved services. A PwC representative will attend the 2022 Annual Meeting to respond to your questions and will have the opportunity to make a statement if he or she desires to do so. If shareholders do not ratify the appointment, the Audit and Risk Committee will reconsider it. Even if shareholders ratify the selection of PwC, the Audit and Risk Committee, in its discretion, may select a new independent auditor at any time during the year if it believes that the change would be in the best interest of the Company. The Audit and Risk Committee periodically reviews the engagement of the independent auditor to assess, among other things, the skills, experience, service levels and costs associated with conducting the annual audit of the Company’s financial statements. PwC has served as our independent auditor since March 2014. VOTE REQUIRED AND RECOMMENDATION The affirmative vote of a majority of the votes cast at our 2022 Annual Meeting, at which a quorum is present, is required to approve Proposal No. 3. Abstentions shall not be treated as votes cast. | |||
![]() | Our Board of Directors Recommends that you vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditor. | ||
Proxies solicited by our Board will be voted “FOR” this ratification unless otherwise instructed. | |||
100 | MSCI |
Beneficial Ownership of Common Stock
Stock Ownership of Executive Officers and RecommendationDirectors
We require members of our Executive Committee (which includes all of our executive officers) and our directors to comply with our stock ownership guidelines to further align their interests with the interests of our shareholders. As of the date of this Proxy Statement, all of the members of our Executive Committee and our directors are in compliance with the applicable stock ownership guidelines. See “Compensation Matters—Compensation Discussion and Analysis—Stock Ownership Guidelines” on page 83 of this Proxy Statement and “Director Compensation and Stock Ownership Guidelines—Non-Employee Director Stock Ownership Guidelines” on page 53 of this Proxy Statement for additional information regarding our ownership guidelines for the members of our Executive Committee and our directors, respectively.
The following table sets forth the beneficial ownership of our common stock by each of our NEOs and directors, and by all of our directors and executive officers as of March 1, 2022, as a group. The address for each of our executive officers and directors is 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007. Percentage of share ownership amounts are based on 81,267,909 shares of our common stock outstanding as of March 1, 2022.
Named Executive Officers | Shares(1) | Right to Acquire(2) | Beneficial Ownership Total(3) | Percent of Class(4) | ||||
Henry A. Fernandez(5) | 2,052,401 | — | 2,052,401 | 2.53% | ||||
Andrew C. Wiechmann | 14,505 | 2,671 | 17,176 | —% | ||||
C.D. Baer Pettit | 259,087 | — | 259,087 | —% | ||||
Scott A. Crum | 30,087 | — | 30,087 | —% | ||||
Robert J. Gutowski | 15,122 | — | 15,122 | —% | ||||
Directors | ||||||||
Robert G. Ashe | 15,825 | 442 | 16,267 | —% | ||||
Wayne Edmunds | 8,095 | 339 | 8,434 | —% | ||||
Catherine R. Kinney(6) | 26,491 | 339 | 26,830 | —% | ||||
Jacques P. Perold | 3,888 | 339 | 4,227 | —% | ||||
Sandy C. Rattray | 569 | 339 | 908 | —% | ||||
Linda H. Riefler | 18,545 | 339 | 18,884 | —% | ||||
Marcus L. Smith | 2,867 | 339 | 3,206 | —% | ||||
Rajat Taneja(7) | 178 | 322 | 500 | —% | ||||
Paula Volent | 980 | 339 | 1,319 | —% | ||||
All Current Executive Officers and Directors as of March 1, 2022 as a Group (14 Persons) | 2,448,640 | 5,808 | 2,454,448 | 3.02% |
(1) | Excludes shares of our common stock that may be acquired through the vesting of RSUs and PSUs. Includes 20,478 shares of our common stock for which Ms. Kinney has elected to defer receipt of such shares until the 60th day after her “separation from service” as a director and 178 shares of our common stock for which Mr. Taneja has elected to defer receipt of such shares until the earlier of (i) June 1, 2025 and (ii) the 60th day after his “separation from service” as a director. |
(2) | Includes shares of our common stock that can be acquired through vesting of RSUs within 60 days of the date of this table (i.e., through May 1, 2022). See the “Outstanding Equity Awards at Fiscal Year-End” Table included herein for additional information regarding RSUs held by each NEO as of December 31, 2021. As of December 31, 2021, each of our non-employee directors had the following outstanding stock awards, all of which are in the form of RSUs: Messrs. Edmunds, Perold, Rattray and Smith and Mmes. Kinney, Riefler and Volent each had 339 RSUs outstanding, Mr. Ashe had 442 RSUs outstanding and Mr. Taneja had 322 RSUs outstanding. Such RSUs are scheduled to vest on May 1, 2022. Ms. Riefler elected to defer receipt of such RSUs until the 60th day after her "separation from service" as a director. Mr. Taneja elected to defer receipt of such RSUs until the earlier of (i) June 1, 2025 and (ii) the 60th day after his “separation from service” as a director. |
2022 PROXY STATEMENT | 101 |
(3) | Except as indicated in the footnotes to this table, to our knowledge each executive officer and director, as of March 1, 2022, had sole voting and investment power with respect to his or her shares of our common stock. Beneficial Ownership Totals may differ from those set forth in Statements of Changes in Beneficial Ownership reported on Form 4 filed with the SEC due to the exclusion herein of RSUs granted by the Company, as described in footnote (1) to this table. |
(4) | All executive officers and directors (other than Mr. Fernandez) each beneficially owned less than 1.0% of the shares of our outstanding common stock. Percentages for each beneficial owner are calculated in accordance with Rule 13d-3(d)(1) under the Exchange Act. Percentages for each named executive officer, executive officer and director as of March 1, 2022 and collectively as a group are based on the number of our shares outstanding as of March 1, 2022, which excludes shares of our common stock that can be acquired through vesting of RSUs within 60 days of the date of this table (i.e., through May 1, 2022). |
(5) | Includes 314,479 shares of our common stock held by the Fernandez 2007 Children’s Trust of which the spouse of Mr. Fernandez is the trustee, 503,109 shares of our common stock held by The Henry Fernandez 2022 MSCI Annuity Trust of which Mr. Fernandez is the trustee, 7,900 shares of our common stock held by one of his children under the Uniform Transfer to Minors Act and 15,800 shares of our common stock directly held by two of Mr. Fernandez’s children. |
(6) | Includes 4,020 shares of our common stock held by the Catherine R. Kinney 2020 GRAT of which Ms. Kinney is the trustee and 10,558 shares of our common stock held by the Catherine R. Kinney 2021 GRAT No. 2 of which Ms. Kinney is the trustee. |
(7) | Mr. Taneja was appointed to the Board, effective June 1, 2021. |
Stock Ownership of Principal Shareholders
The affirmative votefollowing table contains information regarding the only persons we know of that beneficially own more than 5% of our common stock. Percentage of class amounts are based on 81,267,909 shares of our common stock outstanding as of March 1, 2022.
Shares of Common Stock Beneficially Owned | |||
Name and Address | Number of Shares | Percentage of Class(1) | |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 8,548,608(2) | 10.52% | |
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 6,730,522(3) | 8.28% |
(1) | Because percentage of class ownership is based on the total number of shares of our common stock outstanding as of a date that differs from the date used by the principal shareholders to calculate the percentages for purposes of filing the applicable Schedule 13G or 13G/A, percentages of class ownership presented herein may differ from amounts reported in the applicable Schedule 13G or 13G/A filed with the SEC by the relevant principal shareholder. |
(2) | Based on information in a Schedule 13G/A (Amendment No. 9) filed with the SEC on February 10, 2022. The Schedule 13G/A discloses that The Vanguard Group had sole voting power as to 0 shares of our common stock, shared voting power as to 136,149 shares of our common stock, sole dispositive power as to 8,212,212 shares of our common stock and shared dispositive power as to 336,396 shares of our common stock. In addition, the Schedule 13G/A discloses that the person filing the report is an investment adviser in accordance with §240.13d-1(b)(1)(ii)(E) and the identification and classification of the subsidiaries which acquired the securities being reported on therein are set forth on Appendix A thereto. |
(3) | Based on information in a Schedule 13G/A (Amendment No. 10) filed with the SEC on February 3, 2022. The Schedule 13G/A discloses that BlackRock, Inc. had sole voting power as to 6,023,969 shares of our common stock and sole dispositive power as to 6,730,522 shares of our common stock. In addition, the Schedule 13G/A discloses that the person filing the report is a parent holding company or control person in accordance with §240.13d-1(b)(1)(ii)(G) and the identification and classification of the subsidiaries which acquired the securities being reported on therein are set forth on Exhibit A thereto. |
102 | MSCI |
Corporate Governance Documents
MSCI has a majoritycorporate governance webpage that can be found under the “Corporate Governance” link under the “Investor Resources” tab on our website’s Investor Relations homepage (https://ir.msci.com).
Our Corporate Governance Policies (including our Director Independence Standards), Code of Ethics and Business Conduct and committee charters are available electronically, without charge, on or through our website. To access these documents, click on the “Corporate Governance” link under the “Investor Resources” tab found on our website’s Investor Relations homepage (https://ir.msci. com). These documents are also available, without charge, to any shareholder who requests them by writing to us at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007 or via email at investor.relations@msci.com.
Our Code of Ethics and Business Conduct applies to our directors, executive officers and employees. If we make any substantive amendment to, or grant a waiver to, a provision of the votes cast atCode of Ethics and Business Conduct for our 2018 Annual Meeting, at which a quorum is present, is required to approve Proposal No. 3. Abstentions shall not be treated as votes cast.
CEO, CFO, Principal Accounting Officer and Global Controller or persons performing similar functions, we will satisfy the applicable SEC disclosure requirement by promptly disclosing the nature of the amendment or waiver on our website’s Investor Relations homepage OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE(https://ir.msci.com)
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT AUDITOR.
PROXIES SOLICITED BY OUR BOARD WILL BE VOTED “FOR” THIS RATIFICATION UNLESS
OTHERWISE INSTRUCTED.
70 MSCI INC.2018 PROXY STATEMENT
CERTAIN TRANSACTIONSCertain Transactions
Transactions with Shareholders.Shareholders
From time to time, shareholders that own more than 5% of our common stock subscribe to, license or otherwise purchase, in the normal course of business, certain of our products and services. These transactions are negotiated on anarm’s-length basis and are subject to review under our Related Person Transactions Policy described below.
During 2017, Blackrock,2021, BlackRock, Inc., FMR LLC, T. Rowe Price Associates, Inc., and The Vanguard Group and/or their respective affiliates subscribed to, licensed or otherwise purchased in the normal course of business, certain of our products and services. For purposes of full disclosure, revenues recognized by us from subscriptions, licenses and other fees related to our products and services in 20172021 from each of these shareholders and/or their respective affiliates are set forth in the table below.
Name | ||
| $ | |
| $ | |
| ||
|
On February 14, 2018, T. Rowe Price Associates, Inc. reportedTransactions with Directors
Sandy C. Rattray served as the Chief Investment Officer of Man Group plc from 2017 to September 30, 2021. In 2021, Man Group plc and its subsidiaries subscribed to, licensed or otherwise purchased in a Schedule 13G filing that asthe normal course of business, certain of the dateCompany’s products and services. Revenues recognized from subscriptions, licenses and other fees related to such products and services in 2021 were approximately $3.7 million.
Table of filing, it ceased to be a beneficial owner of 5% or more of our common stock.Contents
2022 PROXY STATEMENT | 103 |
RELATED PERSON TRANSACTIONS POLICYRelated Person Transactions Policy
The Company maintains a written Related Person Transactions Policy (the “Policy”), which governs the approval of related person transactions. The NominatingGovernance Committee administers the PolicyPolicy. It is the responsibility of each director, director nominee and may amend it from timeexecutive officer to time. For purposespromptly notify the legal department of the Policy: (i) a Related Person Transaction means (1) a Transaction involving the Companytransactions in which the amount involved exceeds $120,000 inhe or she may be involved. The legal department also conducts diligence and maintains controls and procedures to identify and submit for review and approval any fiscal year and a Related Person has a direct or indirect material interest and (2) any material amendment or modification to the foregoing, regardless of whether such Transaction previously has been approved in accordance with the Policy; (ii) a “Related Person” means any person who is, or at any time since the beginning of the Company’s last fiscal year was, a director or executive officer of MSCI or a nominee to become a director of MSCI, a person or entity that is known to be the beneficial owner of more than 5% of MSCI’s voting securities, excluding any beneficial owner that reports its ownership on Schedule 13G pursuant to Rule13d-1(b) under the Exchange Act (a “5% Stockholder” under the Policy) and the Immediate Family Members (as defined in the Policy) of any of the foregoing; provided, however, that the General Counsel may nevertheless determine that it would be advisable for specific transactions by beneficial owners reporting on Schedule 13G pursuant to Rule13d-1(b) to be reviewed under the Policy; and (iii) a “Transaction” means any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships, including indebtedness, guarantees of indebtedness and transactions involving employment and similar relationships. transactions.
Under the Policy, the Legal and Compliance Department, in consultation with the General Counsel and outside counsel to the extent appropriate,legal department determines whether potential Related Person Transactions are subject toa proposed transaction constitutes a related person transaction requiring review under the Policy and/or disclosure as a Related Person Transaction under SEC rules;provided that any potential Related Person Transaction with the General Counsel will be reviewed by the Chief Executive Officer and referred to the Nominating Committee, if appropriate.disclosure. If the Legal and Compliance Department and the General Counsel determinelegal department determines that (i) the proposed Transactiontransaction constitutes a Related Person Transactionrelated person transaction or (ii) it would be beneficial to further review the Transactiontransaction under the Policy, then in either case, the Transaction is referredlegal department may review and approve certain transactions pursuant to delegation from the Governance Committee or refer the transactions to the Nominating Committee for approval or ratification.Governance Committee.
Directors, director nomineesWhen evaluating a proposed Related Person Transaction, the legal department will consider all relevant facts and executive officers are required to report (i) relationships that are outsidecircumstances, including: (1) the ordinary course of business; (ii) employment of Immediate Family Members (as defined in the Policy); (iii) transactions that would be considered unusual for one or bothdollar amount of the parties; (iv) transactions that aretransaction, the commercial reasonableness of the terms and the purpose of the transaction, as well as the benefit to the Company; (2) whether negotiations were at arm’s length; (3) the terms and conditions of comparable or similar transactions; (4) whether the transaction is provided on terms that may be more favorable than those available to others; (5) the general public; (v) transactions where they receive compensation or other material benefits of any kind from the other entity, in whole or part, due to the creation, negotiation or approvalmateriality and character of the transaction;
MSCI INC.2018 PROXY STATEMENT 71
OTHER MATTERS
(vi) transactions where they are personally involvedrelated person’s interest in the creation, negotiationtransaction and whether there may be any conflicts of interest; (6) whether the transaction would be considered unusual for one or approvalboth of the parties and (7) whether the transaction (other than as an employee of MSCI); and (vii) transactions where they are a more than 10% equity holder of the other entity.
In determining whether to approve a Related Person Transaction, the Nominating Committee considers all relevant facts and circumstances, including (if applicable) without limitation:
Except as the Legal and Compliance Department shall otherwise determine based on the information provided pursuant to the Policy, the following Transactions have been determined not to be Related Person Transactions:
may impact director independence if applicable.
72 MSCI INC.2018 PROXY STATEMENT
OTHER MATTERS
We do not know of any matters that may be presented for action at the meeting other than those described in this Proxy Statement. If any other matter is properly brought before the meeting, the proxy holders will vote on such matter in their discretion.
|
104 | MSCI |
Annex A: Frequently Asked Questions
year ended December 31, 2017 are available free of charge atwww.proxyvote.com. Information
contained on this website is not incorporated by reference into this Proxy Statement or any other
report we file with the SEC.
MSCI INC.2018 PROXY STATEMENT 73
FREQUENTLY ASKED QUESTIONS
How do we refer to MSCI Inc. in this Proxy Statement?
We refer to MSCI Inc. as the “Company,” “MSCI,” “we,” “our” or “us” and the Board of Directors of MSCI Inc. as the “Board.” MSCI is incorporated in Delaware and its shares are listed on The New York Stock Exchange under the symbol MSCI. References to “Shares,” “shares” or “shares of our common stock” in this Proxy Statement refer to shares of our common stock, par value $0.01 per share.
What are the date, time and place of the 20182022 Annual Meeting?
We will hold the 20182022 Annual Meeting on May 10, 2018April 26, 2022 at 2:30 P.M., Eastern Time, via the internet atwww.virtualshareholdermeeting.com/MSCI2018MSCI2022.
In order to access the virtual annual meeting, you will be asked to provide your12-digit 16-digit control number. Instructions on how to attend and participate via the internet, including how to demonstrate proof of share ownership, are posted atwww.virtualshareholdermeeting.com/MSCI2018MSCI2022. Information contained on this website is not incorporated by reference into this Proxy Statement or any other report we file with the SEC.
Will the 2022 Annual Meeting be webcast?
Yes. You may attend the annual meeting virtually at www.virtualshareholdermeeting.com/MSCI2022, where you will be able to vote electronically and submit questions during the meeting. A webcast replay of the 2022 Annual Meeting will also be archived on our Investor Relations website, https://ir.msci.com/events.cfm, until April 26, 2023.
How do I submit a question at the 2022 Annual Meeting?
To submit questions before the 2022 Annual Meeting, please email your question(s) to the Corporate Secretary at corporatesecretary@msci.com by no later than April 25, 2022. Please include “Annual Meeting Questions” in the subject line and provide your name, 16-digit control number and, if applicable, indicate the proposal to which your question relates in the body of the email.
You may submit a question during the meeting via our virtual shareholder meeting website, www.virtualshareholdermeeting. com/MSCI2022. If your question is properly submitted during the relevant portion of the meeting agenda, our Chairman intends to respond to your question during the live webcast. Questions on similar topics may be combined and answered together. A webcast replay of the 2022 Annual Meeting, including the Q&A session, will also be archived on our Investor Relations website, https://ir.msci.com/events.cfm, until April 26, 2023.
What if the Company encounters technical difficulties during the 2022 Annual Meeting?
If we experience technical difficulties during the meeting (e.g., a temporary or prolonged power outage), our Chairman will determine whether the meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify shareholders of the decision via www.virutalshareholdermeeting.com/MSCI2022.
If you encounter technical difficulties accessing our meeting or asking questions during the meeting, a support line will be available on the login page of the virtual meeting website.
Who may attend the 2022 Annual Meeting?
All stockholders as of March 1, 2022, or their duly appointed proxies, may attend the 2022 Annual Meeting. In order to attend the 2022 Annual Meeting, a stockholder must own MSCI common stock at the close of business on March 1, 2022. If your shares are held in the name of a broker, bank, custodian, nominee or other record holder (“street name”), you must obtain a proxy, executed in your favor, from the holder of record (that is, your broker, bank, custodian, or nominee) to be able to vote at the 2022 Annual Meeting.
2022 PROXY STATEMENT | 105 |
Who may vote at the 20182022 Annual Meeting?
You can vote your shares of MSCI common stock at our 20182022 Annual Meeting if you were a shareholder at the close of business on March 14, 20181, 2022 (the “record date”).
As of March 14, 2018,1, 2022, there were 89,876,91881,267,909 shares of MSCI common stock outstanding. Each share of MSCI common stock entitles you to one vote on each matter voted on at the annual meeting of shareholders.
A majority of the shares of MSCI common stock outstanding at the close of business on the record date must be present in order to hold the meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the 20182022 Annual Meeting if you vote through the internet at the virtual annual meeting of shareholders or properly submit your proxy prior to the 20182022 Annual Meeting.
Why did I receive aone-page notice in the mail regarding the internet availability of proxy materials instead of a full set of printed proxy materials?
Pursuant to the “notice and access” rules adopted by the SEC, we are making this Proxy Statement and our 20172021 Annual Report on Form10-K (including any amendments thereto) available to our shareholders over the internet. As a result, unless you have previously requested electronic access to our proxy materials or the receipt of paper proxy materials, you will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy Statement and our 20172021 Annual Report on Form10-K (including any amendments thereto) over the internet, how to request a free paper or email copy of these materials and how to vote by mail, telephone or via the internet. We will mail the Notice of Internet Availability of Proxy Materials on or about March 23, 2018.16, 2022. The Notice of Internet Availability of Proxy Materials is not a proxy card and cannot be used to vote your shares.
In addition, if you are voting online, you will be prompted to consent to receiving proxy materials electronically in future years. Choosing to receive your future proxy materials electronically will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings of shareholders on the environment. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials electronically will remain in effect until you terminate it. See “How do I sign up for electronic delivery of proxy materials?” below for further information on electing to receive proxy materials electronically.
MSCI INC.2018 PROXY STATEMENT A-1
ANNEX A
What is the difference between holding shares as a “record holder” and as a beneficial owner of shares held in “street name”?
Record Holder.Holder. If your shares are registered directly in your name with MSCI’s transfer agent, Broadridge Corporate Issuer Solutions, Inc. (including its affiliates, “Broadridge”), you are considered a “record holder” with respect to those shares, and the Notice of Internet Availability of Proxy Materials will be sent directly to you.
Beneficial Owner of Shares Held in Street Name.If your shares are held in an account with a brokerage firm, bank, broker dealer, or other intermediary, then you are considered a beneficial owner of shares held in “street name,” and the Notice of Internet Availability of Proxy Materials and other proxy materials will be forwarded to you by that intermediary. As a beneficial owner of shares held in “street name,” you have the right to direct that intermediary on how to vote the shares held in your account by following their instructions for voting.voting and using their forms. If you do not provide your brokerage firm, bank, broker dealer or other intermediary with instructions on how to vote your shares, such intermediary or intermediary nominee will be able to vote your shares only with respect to the proposal related to the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditor for 2018.2022.
106 | MSCI | ANNEX A: FREQUENTLY ASKED QUESTIONS |
How do I vote my shares?
You may direct your vote by internet, telephone or mail. Your vote must be received by the deadline specified on the proxy card or voting instruction form, as applicable.
If | If
| |||
By InternetPrior to the
| www.proxyvote.com | |||
| ||||
By Internet During the 2022 Annual Meeting* | www.virtualshareholdermeeting.com/MSCI2022You may attend the meeting via the internet and vote during the meeting. Have your proxy card in hand when you access the website and follow the instructions. | www.virtualshareholdermeeting.com/MSCI2022 | ||
By Telephone* (24 hours a day): | 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 25, 2022. Have your proxy card in hand when you call and then follow the instructions. | Follow the voting instructions you receive from your brokerage firm, bank, broker dealer or other intermediary. | ||
By Mail: | You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 | Follow the voting instructions you receive from your brokerage firm, bank, broker dealer or other intermediary. |
* | While MSCI and Broadridge do not charge any fees for voting by internet or telephone, there may be related costs from other parties, such as usage charges from internet access providers and telephone companies, for which you are responsible. |
A-2 MSCI INC.2018 PROXY STATEMENT
ANNEX A
How does the Board recommend that I vote and what vote is required for adoption or approval of each matter to be voted on?
Proposal No. | Proposal | Vote Required | Directors’ Recommendation | |||
1 | Election of Directors | Number of votes cast “FOR” exceeds number of votes cast “AGAINST” for each director | FORall nominees | |||
2 | Advisory Vote to Approve Executive Compensation(Say-on-Pay) | Majority of the total votes cast by holders of shares present through the virtual meeting or represented by proxy | FORthe approval of the Executive Compensation of our NEOs | |||
3 | Ratification of the Appointment of MSCI’s Independent Auditor | Majority of the total votes cast by holders of shares present through the virtual meeting or represented by proxy | FORthe ratification of the appointment of PricewaterhouseCoopers LLP |
How will my shares be voted if I do not give specific voting instructions and what are brokernon-votes?
Record HoldersHolders. . If you indicate that you wish to vote as recommended by our Board or if you sign, date and return a proxy card but do not give specific voting instructions, then the proxy holders will vote your shares in the manner recommended by our Board on all matters presented in this Proxy Statement (e.g., “FOR”) for Proposal No. 1, No. 2 and No. 3) and in their discretion regarding any other matters properly presented for a vote at our 20182022 Annual Meeting. As of the date of this Proxy Statement, we did not know of any proposals or matters to be raised at the 20182022 Annual Meeting other than those presented in this Proxy Statement.
2022 PROXY STATEMENT | 107 |
Beneficial Owners of Shares Held in “Street Name.” Brokernon-voting non-votes occurs when your brokerage firm, bank, broker dealer or other intermediary has not received specific voting instructions from you with respect to shares held in “street name” and the broker does not have discretionary voting authority with respect to a proposal. If you are the beneficial owner of shares held in “street name” and you do not give instructions as to how to vote, your broker may have authority to vote your shares only on discretionary items but not onnon-discretionary items, as determined by the NYSE.
● | Non-discretionary items.The following proposals are considered |
● | Discretionary |
Brokernon-votes are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. However, brokernon-votes are not counted for purposes of Proposal Nos. 1 and 2 and will therefore have no effect on the outcome of these proposals. This is because each of these proposals requires consideration of the votes cast and brokernon-votes are not considered votes cast under the laws of Delaware (our state of incorporation). Therefore, if you hold your shares in an account with a brokerage firm, bank, a broker dealer or other intermediary, it is critically important that you submit your voting instructions if you want your shares to count for thenon-discretionary items listed above.
How are abstentions treated?
Abstentions are also counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. Abstentions have no effect on the determination of whether a nominee or any of the proposals have received the vote of a majority of the shares of common stock present or represented by proxy and voting at the 2022 Annual Meeting. However, abstentions could prevent the approval of a proposal where the number of affirmative votes, though a majority of the votes represented and cast, does not constitute a majority of the required quorum.
MSCI INC.2018 PROXY STATEMENT A-3
ANNEX A
What are my choices for casting my vote on each matter to be voted on?
Proposal No. | Proposal | Voting Options | Effect of Abstentions | |||
1 | Election of Directors | FOR, AGAINST or ABSTAIN (for each director nominee) | No effect—not counted as a “vote cast” | |||
2 | Advisory Vote to Approve Executive Compensation(Say-on-Pay) | FOR, AGAINST or ABSTAIN | No effect—not counted as a “vote cast” | |||
3 | Ratification of the Appointment of MSCI’s Independent Auditor | FOR, AGAINST or ABSTAIN | No effect—not counted as a “vote cast” |
How many votes are required to elect directors and adopt proposals?
The election of each director and ratification of the appointment of PwC as MSCI’s independent auditor requires the affirmative vote of a majority of the shares of common stock represented or by proxy at the meeting and entitled to vote. The approval of a resolution regarding the compensation of our NEOs as disclosed in this Proxy Statement is a non-binding advisory vote; however, we value the opinions of our stockholders and will take into account the outcome of this vote in considering future compensation arrangements. A majority of the shares entitled to vote on a matter, whether present virtually or by proxy, will constitute a quorum at the meeting.
What happens if a director does not receive a majority of the votes required for his or herre-election?
Under the laws of Delaware (our state of incorporation), if the director is not elected at the annual meeting, the director will continue to serve on the Board as a “holdover director.” OurHowever, our Bylaws also provide that, in order for an incumbent director to become a nominee of the Board, the director must submit an irrevocable resignation as director that becomes effective if (i) he or she does not receive a majority of the votes cast in an uncontested election and (ii) the Board accepts the resignation. If a director does not receive a majority of the votes cast in an uncontested election, the NominatingGovernance Committee will consider the director’s resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject the resignation and publicly disclose its decision including the rationale behind the decision if it rejects the resignation, within 90 days after the election results are certified.
108 | MSCI | ANNEX A: FREQUENTLY ASKED QUESTIONS |
How do I revoke or change my proxy?
If you are a “record holder,” you can revoke or change your proxy at any time before your shares are voted, subject to the voting deadlines that are described on the proxy card or voting instruction form, as applicable, by:
● | Voting again by internet or by telephone (only your last internet or telephone proxy submitted prior to the meeting will be counted); |
● | Signing and returning a new proxy card with a later date; or |
● | Voting by internet while attending the virtual annual meeting (attending the annual meeting by internet does not revoke your proxy unless you vote by internet during the virtual annual meeting). |
If you are a “record holder,” you may also revoke your proxy by giving written notice of revocation to c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007, which must be received no later than 5:00 P.M., Eastern Time, on May 9, 2018.April 25, 2022.
If you are a beneficial owner of shares held in “street name,” you may revoke your proxy by following the instructions your brokerage firm, bank, broker dealer or other intermediary provides.
Will the 2018 Annual Meeting be webcast?
Yes. You may attend the annual meeting virtually atwww.virtualshareholdermeeting.com/MSCI2018, where you will be able to vote electronically and submit questions during the meeting. A webcast replay of the 2018 Annual Meeting will also be archived on our Investor Relations website, http://ir.msci.com/events.cfm, until May 10, 2019.
Will my vote be confidential?
Our Bylaws provide that your individual vote is confidential and will not be disclosed to any officer, director or employee of MSCI, except as required by law and in certain limited circumstances such as when you request or consent to disclosure.disclosure, or make a request or comment on the proxy card.
Who counts the votes cast at the 2022 Annual Meeting?
Representatives of Broadridge will tabulate the votes cast at the 2022 Annual Meeting, and American Election Services, LLC will act as the independent inspector of elections.
Where can I find the voting results of the 20182022 Annual Meeting?
TheWe expect to announce the preliminary voting results will be announced at the 20182022 Annual Meeting. The final voting results will be tallied by representatives of Broadridge, our inspector of elections, and will be subsequently published by us by the filing of a Current Report on Form8-K with the SEC shortlywithin four business days after the 20182022 Annual Meeting.
A-4 MSCI INC.2018 PROXY STATEMENT
ANNEX A
We make available free of charge, on or through our website, these reports and other information as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC. To access these reports, click on the “SEC Filings” link found on our website’s Investor Relations homepage (http://ir.msci.com ). Information contained on our website is not incorporated by reference into this Proxy Statement or any other report we file with the SEC.
Who will pay for the cost of the proxy solicitation?
We pay the expenses of the preparation of proxy materials and the solicitation of proxies for our 20182022 Annual Meeting. Proxies may be solicited on our behalf by directors, officers, employees or agents in person or by telephone, electronic transmission and facsimile transmission. Our directors, officers and employees will receive no additional compensation for any such solicitation.
We have also hired Saratoga Proxy Consulting LLC (“Saratoga”), 520 8th8th Avenue, New York, NY 10018, to assist in the distribution and solicitation of proxies. We will pay Saratoga a fee of $10,000, plus reasonable expenses, for these services. We will reimburse brokers and other similar institutions for costs incurred by them in mailing proxy materials to beneficial owners.
How do I sign up for electronic delivery of proxy materials?
Shareholders can access this Proxy Statement and our 20172021 Annual Report on Form10-K via the internet atwww.proxyvote.comby following the instructions outlined on the secure website. For future annual meetings of shareholders, shareholders can consent to accessing our proxy materials, including the Notice of Internet Availability of Proxy Materials, our 2021 Annual Report on Form10-K and the Proxy Statement, electronically in lieu of receiving hard copies by mail. To receive our proxy materials electronically, you will need access to a computer and an email account. If you vote through the internet atwww.proxyvote.com, you will be prompted to consent to receiving proxy materials electronically in future years. To consent to electronic delivery, when prompted, you must indicate that you agree to receive such materials electronically in future years.
2022 PROXY STATEMENT | 109 |
Shareholders that wish to revoke their request for electronic delivery may do so at any time without charge, by contacting us in writing at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007 or by telephone at(212) 981-7465.
If you hold your shares through a brokerage firm, bank, broker dealer or other intermediary and you have not already done so, you can choose electronic delivery of our proxy materials by contacting such intermediary. You may also update your email address by contacting such intermediary.
What is householding?
Consistent with notices sent to shareholders of record sharing a single address, we will send only one copy of each of the Notice of Internet Availability of Proxy Materials, our 20172021 Annual Report on Form10-K and this Proxy Statement to that address unless we have received contrary instructions from any shareholder at that address. This “householding” practice reduces our printing and postage costs. Shareholders may request or discontinue householding, or may request a separate copy of each of the Notice of Internet Availability of Proxy Materials, our 20172021 Annual Report on Form10-K or this Proxy Statement as follows:
● | Shareholders wishing to discontinue or begin householding, should contact us in writing at c/o Corporate Secretary at MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007 or by telephone at (212) 981-7465. |
● | Shareholders owning their shares through a bank, broker or other holder of record who wish to either discontinue or begin householding should contact their record holder. |
● | Any householded shareholder may request prompt delivery of a copy of each of the Notice of Internet Availability of Proxy Materials, our 2021 Annual Report on Form 10-K or the Proxy Statement, as applicable, by contacting us at (212) 981-7465 or by writing to us at Investor Relations, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007 or via email at investor.relations@msci.com. Instructions for requesting such materials are also included in the Notice of Internet Availability of Proxy Materials. |
How can I submit a recommendation for a director candidate?
The Governance Committee oversees searches for and identifies qualified individuals for membership on MSCI’s Board. Please see page 30 of this Proxy Statement for additional information on director qualifications.
Shareholders may make recommendations for consideration by the Governance Committee at any time. To recommend a director candidate for consideration by the Governance Committee, a shareholder must submit a written notice which demonstrates that it is being submitted by a shareholder of MSCI and include information about each proposed director candidate, including name, age, business address, principal occupation, principal qualifications and other relevant biographical information. In addition, the shareholder must confirm his or her candidate’s consent to serve as a director. There is no difference in the manner in which the Governance Committee evaluates nominees proposed by shareholders and those identified by the Governance Committee. Shareholders must send recommendations to the Governance Committee, c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007.
How can I submit nominees (such as through proxy access) or a shareholder proposal at the 2023 annual meeting of shareholders?
Shareholders who wish to submit a “proxy access” nomination for inclusion in our proxy statement in connection with our 2023 annual meeting of shareholders may do so by submitting a nomination notice, in compliance with the procedures and along with the other information required by our Bylaws, in writing at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007 or by telephone at (212) 981-7465.
corporatesecretary@msci.com, no earlier than October 17, 2022 and no later than November 16, 2022.
MSCI INC.2018 PROXY STATEMENT A-5
ANNEX A
How can I submit a shareholder proposal at the 2019 annual meeting of shareholders?
Shareholders intending to present a proposal at the 20192023 annual meeting of shareholders and have itunder SEC Rule 14a-8 to request that the proposal be included in next year’s Proxy Statement must submit the proposal to us in writing at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007.10007 or by email to corporatesecretary@msci.com. We must receive the proposal by no later than November 23, 2018.16, 2022. If we hold our 20192023 annual meeting of shareholders more than 30 days before or after May 10, 2019April 26, 2023 (theone-year anniversary date of the 20182022 Annual Meeting), we will disclose the new deadline by which shareholder proposals must be received under Item 5 of Part II of our earliest possible Quarterly Report on Form10-Q or, if impracticable, by any means reasonably determined
110 | MSCI | ANNEX A: FREQUENTLY ASKED QUESTIONS |
to inform shareholders. In addition, shareholder proposals must otherwise comply with the requirements of Rule14a-8 under the Exchange Act and with the SEC regulations underRule 14a-8 regarding the inclusion of shareholder proposals in company-sponsored proxy materials.
Shareholders intending to present a proposal at the 20192023 annual meeting of shareholders, but not to includefor inclusion of the proposal in our Proxy Statement, or to nominate a person for election as a director, must comply with the requirements set forth in our Bylaws. Our Bylaws require, among other things, that our Corporate Secretary receive written notice from the shareholder of record of intent to present such proposal or nomination no more than 120 days and no less than 90 days prior to the anniversary of the preceding year’s annual meeting of shareholders.
Therefore, the Company must receive notice of such a proposal or nomination for the 2019 annual2023 Annual meeting of shareholders no earlier than January 10, 2019December 27, 2022 and no later than February 9, 2019.January 26, 2023. The notice must contain the information required by our Bylaws, a copy of which is available upon request to us in writing at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007.
How can I submit a recommendation of a director candidate?
The Nominating Committee oversees searches for and identifies qualified individuals for membership on MSCI’s Board. See “Corporate Governance—Director Qualifications” above.
Shareholders of record may make recommendations for consideration by the Nominating Committee at any time. To recommend a director candidate for consideration by the Nominating Committee, a shareholder must submit a written notice which demonstrates that it is being submitted by a shareholder of record of MSCI and include information about each proposed director candidate, including name, age, business address, principal occupation, principal qualifications and other relevant biographical information. In addition, the shareholder must confirm his or her candidate’s consent to serve as a director. There is no difference in the manner in which the Nominating Committee evaluates nominees proposed by shareholders and those identified by the Nominating Committee. Shareholders must send recommendations to the Nominating Committee, c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007.
How do I communicate with individual directors or the Board as a group?
Shareholders and other interested parties may contact any member (or all members) of the Board by mail. To communicate with the Board, any individual director or any group or committee of directors, correspondence should be addressed to the Board or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent to the Board at c/o Corporate Secretary, MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007. Correspondence that is unrelated to the duties and responsibilities of the Board such as spam, junk mail and mass mailings, product complaints, personal employee complaints, product inquiries, new product suggestions, resumes and other forms of job inquiries, surveys, business solicitations or advertisements will not be forwarded to the Board.
How do I report issues regarding accounting, internal controls and other auditing matters?
Any communication tointerested parties may report potential issues regarding accounting, internal controls and other auditing mattersmatters. The communication should be marked “Personal and Confidential” and sent to MSCI Inc., 7 World Trade Center, 250 Greenwich Street, 49th Floor, New York, New York 10007, Attention: Chair of the Audit Committee of MSCI Inc., in care of the General Counsel. Our Procedures for Submission of Ethical or Accounting Related Complaints are available on our website. To access this document, click on the “Corporate Governance” link under the “Investor Resources” tab found on our website’s Investor Relations homepage (http:https://ir.msci.com)ir.msci.com). Information contained on our website is not incorporated by reference into this Proxy Statement or any other report we file with the SEC.
2022 PROXY STATEMENT | 111 |
A-6 MSCI INC.2018 PROXY STATEMENT
Annex B B: Supplemental Financial Information
RECONCILIATIONSOF NON-GAAP FINANCIAL MEASURESAND SUPPLEMENTAL INFORMATION REGARDING AGGREGATE RETENTION RATEAND RUN RATENon-GAAP Financial Measures
Full-Year 2021 Reconciliation of Operating Revenue Growth to Organic Operating Revenue Growth (unaudited)
Comparison of The Years Ended December 31, 2021 and 2020 | ||||||||||||
Index | Total Change Percentage | Recurring Subscription Change Percentage | Asset- Based Fees Change Percentage | Non-Recurring Revenues Change Percentage | ||||||||
Operating revenue growth | 23.1% | 12.1% | 38.6% | 29.8% | ||||||||
Impact of acquisitions and divestitures | —% | —% | —% | —% | ||||||||
Impact of foreign currency exchange rate fluctuations | 0.1% | 0.1% | (0.1% | ) | —% | |||||||
Organic operating revenue growth | 23.2% | 12.2% | 38.5% | 29.8% | ||||||||
Analytics | Total Change Percentage | Recurring Subscription Change Percentage | Asset- Based Fees Change Percentage | Non-Recurring Revenues Change Percentage | ||||||||
Operating revenue growth | 5.9% | 5.3% | —% | 48.1% | ||||||||
Impact of acquisitions and divestitures | —% | —% | —% | —% | ||||||||
Impact of foreign currency exchange rate fluctuations | 0.2% | 0.2% | —% | (0.1% | ) | |||||||
Organic operating revenue growth | 6.1% | 5.5% | —% | 48.0% | ||||||||
ESG and Climate | Total Change Percentage | Recurring Subscription Change Percentage | Asset- Based Fees Change Percentage | Non-Recurring Revenues Change Percentage | ||||||||
Operating revenue growth | 49.2% | 47.9% | —% | 152.5% | ||||||||
Impact of acquisitions and divestitures | —% | —% | —% | —% | ||||||||
Impact of foreign currency exchange rate fluctuations | (5.8% | ) | (5.9% | ) | —% | (1.9% | ) | |||||
Organic operating revenue growth | 43.4% | 42.0% | —% | 150.6% | ||||||||
All Other – Private Assets | Total Change Percentage | Recurring Subscription Change Percentage | Asset- Based Fees Change Percentage | Non-Recurring Revenues Change Percentage | ||||||||
Operating revenue growth | 51.3% | 54.5% | —% | (23.9% | ) | |||||||
Impact of acquisitions and divestitures | (41.3% | ) | (43.1% | ) | —% | —% | ||||||
Impact of foreign currency exchange rate fluctuations | (6.0% | ) | (6.0% | ) | —% | (3.6% | ) | |||||
Organic operating revenue growth | 4.0% | 5.4% | —% | (27.5% | ) |
112 | MSCI | ANNEX B: SUPPLEMENTAL FINANCIAL INFORMATION |
Consolidated | Total Change Percentage | Recurring Subscription Change Percentage | Asset- Based Fees Change Percentage | Non-Recurring Revenues Change Percentage | ||||||||
Operating revenue growth | 20.5% | 14.3% | 38.6% | 33.9% | ||||||||
Impact of acquisitions and divestitures | (1.3% | ) | (1.8% | ) | —% | —% | ||||||
Impact of foreign currency exchange rate fluctuations | (0.5% | ) | (0.7% | ) | (0.1% | ) | (0.3% | ) | ||||
Organic operating revenue growth | 18.7% | 11.8% | 38.5% | 33.6% |
Reconciliation of Adjusted EBITDA to Net Income (unaudited)
Year Ended
| |||||||||||||||
In thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||||||||||||
Index Adjusted EBITDA | $ | 522,043 | $ | 431,478 | $ | 392,987 | |||||||||
Analytics Adjusted EBITDA | 125,349 | 128,507 | 95,468 | ||||||||||||
All Other Adjusted EBITDA | 11,783 | 9,472 | (6,758 | ) | |||||||||||
Consolidated Adjusted EBITDA | 659,175 | 569,457 | 481,697 | ||||||||||||
Amortization of Intangible Assets | 44,547 | 47,033 | 46,910 | ||||||||||||
Depreciation and Amortization of Property, Equipment and Leasehold Improvements | 35,440 | 34,320 | 30,889 | ||||||||||||
Operating Income | 579,188 | 488,104 | 403,898 | ||||||||||||
Other Expense (Income), Net | 112,289 | 102,166 | 54,344 | ||||||||||||
Provision for Income Taxes | 162,927 | 125,083 | 119,516 | ||||||||||||
Income from Continuing Operations | 303,972 | 260,855 | 230,038 | ||||||||||||
Income (Loss) from Discontinued Operations, Net of Income Taxes | – | – | (6,390 | ) | |||||||||||
Net Income | $ | 303,972 | $ | 260,855 | $ | 223,648 |
Years Ended | ||||||||||||
In Thousands (Except Percentages) | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |||||||||
Index Adjusted EBITDA | $ | 951,312 | $ | 766,493 | $ | 670,188 | ||||||
Analytics Adjusted EBITDA | 198,799 | 172,924 | 152,113 | |||||||||
ESG and Climate Adjusted EBITDA | 29,748 | 22,851 | 21,813 | |||||||||
All Other – Private Assets Adjusted EBITDA | 16,931 | 9,242 | 6,385 | |||||||||
Consolidated Adjusted EBITDA | 1,196,790 | 971,510 | 850,499 | |||||||||
Amortization of intangible assets | 80,592 | 56,941 | 49,410 | |||||||||
Depreciation and amortization of property, equipment and leasehold improvements | 28,901 | 29,805 | 29,999 | |||||||||
Impairment related to sublease of leased property | 7,702 | — | — | |||||||||
Acquisition-related integration and transaction costs(1) | 6,870 | — | — | |||||||||
Multi-Year PSU payroll tax expense | — | — | 15,389 | |||||||||
Operating Income | 1,072,725 | 884,764 | 755,701 | |||||||||
Other expense (income), net | 214,589 | 198,539 | 152,383 | |||||||||
Provision for income taxes | 132,153 | 84,403 | 39,670 | |||||||||
Net Income | $ | 725,983 | $ | 601,822 | $ | 563,648 | ||||||
Adjusted EBITDA Margin (%) | 58.6 | % | 57.3 | % | 54.6 | % | ||||||
Net Income Margin (%) | 35.5 | % | 35.5 | % | 36.2 | % |
(1) | Incremental and non-recurring costs attributable to acquisitions directly related to the execution of the transaction and integration of the acquired business that have occurred no later than 12 months after the close of the transaction. |
Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted EPS to Net Income and Diluted EPS (unaudited)
Years Ended | |||||||||||||
In Thousands, Except Per Share Data | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | ||||||||||
Net Income | $ | 725,983 | $ | 601,822 | $ | 563,648 | |||||||
Plus: Amortization of acquired intangible assets and equity method investment basis difference | 47,001 | 37,413 | 34,773 | ||||||||||
Plus: Multi-Year PSU payroll tax expense | — | — | 15,389 | ||||||||||
Less: Discrete excess tax benefit related to Multi-Year PSU vesting | — | — | (66,581 | ) | |||||||||
Plus: Debt extinguishment costs associated with the 2024, 2025, 2026 and 2027 Senior Notes Redemptions | 59,104 | 44,930 | 16,794 | ||||||||||
Plus: Write-off of internally developed capitalized software | 16,013 | — | — | ||||||||||
Plus: Impairment related to sublease of leased property(1) | 8,702 | — | — | ||||||||||
Plus: Acquisition-related integration and transaction costs(2)(3) | 7,041 | — | — | ||||||||||
Less: Gain from changes in ownership interest of equity method investee | (6,972 | ) | — | — | |||||||||
Less: Tax Reform adjustments | — | (6,256 | ) | — | |||||||||
Less: Income tax effect | (26,462 | ) | (16,490 | ) | (13,226 | ) | |||||||
Adjusted net income | $ | 830,410 | $ | 661,419 | $ | 550,797 |
Year Ended
| ||||||||||
In thousands, except per share data | Dec. 31, 2017 | Dec. 31, 2016 | ||||||||
Net Income | $ | 303,972 | $ | 260,855 | ||||||
Plus: Amortization of intangible assets | 39,157 | 47,033 | ||||||||
Less: Gain on sale of investment | (771 | ) | – | |||||||
Plus: Tax Reform adjustments | 34,500 | – | ||||||||
Less: Income tax effect | (10,772 | ) | (15,243 | ) | ||||||
Adjusted net income | $ | 366,086 | $ | 292,645 | ||||||
Diluted EPS | $ | 3.31 | $ | 2.70 | ||||||
Plus: Amortization of intangible assets | 0.43 | 0.49 | ||||||||
Less: Gain on sale of investment | (0.01 | ) | – | |||||||
Plus: Tax Reform adjustments | 0.38 | – | ||||||||
Less: Income tax effect | (0.13 | ) | (0.16 | ) | ||||||
Adjusted EPS | $ | 3.98 | $ | 3.03 |
MSCI INC.2018 PROXY STATEMENT B-1
ANNEX B
2022 PROXY STATEMENT | 113 |
Years Ended | ||||||||||||
In Thousands, Except Per Share Data | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |||||||||
Diluted EPS | $ | 8.70 | $ | 7.12 | $ | 6.59 | ||||||
Plus: Amortization of acquired intangible assets and equity method investment basis difference | 0.56 | 0.44 | 0.41 | |||||||||
Plus: Multi-Year PSU payroll tax expense | — | — | 0.18 | |||||||||
Less: Discrete excess tax benefit related to Multi-Year PSU vesting | — | — | (0.78 | ) | ||||||||
Plus: Debt extinguishment costs associated with the 2024, 2025, 2026 and 2027 Senior Notes Redemptions | 0.71 | 0.53 | 0.20 | |||||||||
Plus: Write-off of internally developed capitalized software | 0.19 | — | — | |||||||||
Plus: Impairment related to sublease of leased property(1) | 0.10 | — | — | |||||||||
Plus: Acquisition-related integration and transaction costs(2)(3) | 0.08 | — | — | |||||||||
Less: Gain from changes in ownership interest of equity method investee | (0.08 | ) | — | — | ||||||||
Plus: Tax Reform adjustments | — | (0.07 | ) | — | ||||||||
Less: Income tax effect | (0.31 | ) | (0.19 | ) | (0.16 | ) | ||||||
Adjusted EPS | $ | 9.95 | $ | 7.83 | $ | 6.44 |
(1) | Right-of-use impairment of $7.7 million related to sublease of leased property is presented within “General and administrative” expenses and the write-off of leasehold improvements of $1.0 million is presented within “Depreciation and amortization of property, equipment and leasehold improvements” expenses. |
(2) | Acquisition-related integration and transaction costs of $1.4 million are presented within “General and administrative” expenses and $0.2 million are presented within “Depreciation and amortization of property, equipment and leasehold improvements” expenses. |
(3) | Incremental and non-recurring costs attributable to acquisitions directly related to the execution of the transaction and integration of the acquired business that have occurred no later than 12 months after the close of the transaction. |
Reconciliation of Adjusted EBITDA Expenses to Operating Expenses (unaudited)
Years Ended | |||||||||||||||||
Year Ended
| |||||||||||||||||
Dec. 31, 2017 | Dec. 31, 2016 | ||||||||||||||||
Index Adjusted EBITDA expenses | $ | 196,916 | $ | 182,073 | |||||||||||||
In Thousands | Dec. 31, 2021 | Dec. 31, 2020 | |||||||||||||||
Index adjusted EBITDA expenses | $ | 300,452 | $ | 250,002 | |||||||||||||
Analytics adjusted EBITDA expenses | 332,920 | 319,846 | 345,500 | 340,884 | |||||||||||||
All Other adjusted EBITDA expenses | 85,161 | 79,293 | |||||||||||||||
ESG and Climate adjusted EBITDA expenses | 136,444 | 88,513 | |||||||||||||||
All Other – Private Assets adjusted EBITDA expenses | 64,358 | 44,481 | |||||||||||||||
Consolidated adjusted EBITDA expenses | 614,997 | 581,212 | 846,754 | 723,880 | |||||||||||||
Amortization of intangible assets | 44,547 | 47,033 | 80,592 | 56,941 | |||||||||||||
Depreciation and amortization of property, equipment and leasehold improvements | 35,440 | 34,320 | 28,901 | 29,805 | |||||||||||||
Impairment related to sublease of leased property | 7,702 | — | |||||||||||||||
Acquisition-related integration and transaction costs(1) | 6,870 | — | |||||||||||||||
Total Operating Expenses | $ | 694,984 | $ | 662,565 | $ | 970,819 | $ | 810,626 |
(1) | Incremental and non-recurring costs attributable to acquisitions directly related to the execution of the transaction and integration of the acquired business that have occurred no later than 12 months after the close of the transaction. |
Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities to Free Cash Flow (unaudited)
Years Ended | ||||||||||||
In Thousands | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |||||||||
Net cash provided by operating activities | $ | 936,069 | $ | 811,109 | $ | 709,523 | ||||||
Capital expenditures | (13,509 | ) | (21,826 | ) | (29,116 | ) | ||||||
Capitalized software development costs | (39,285 | ) | (29,149 | ) | (24,654 | ) | ||||||
Capex | (52,794 | ) | (50,975 | ) | (53,770 | ) | ||||||
Free cash flow | $ | 883,275 | $ | 760,134 | $ | 655,753 |
Year Ended
| ||||||||||
In thousands | Dec. 31, 2017 | Dec. 31, 2016 | ||||||||
Net cash provided by operating activities | $ | 404,158 | $ | 442,363 | ||||||
Capital expenditures | (33,177 | ) | (32,284 | ) | ||||||
Capitalized software development costs | (15,640 | ) | (10,344 | ) | ||||||
Capex | (48,817 | ) | (42,628 | ) | ||||||
Adjusted net income | $ | 355,341 | $ | 399,735 |
ReconciliationTable of Effective Tax Rate to Adjusted Tax Rate (unaudited)Contents
Year Ended
| ||||||||||
Dec. 31, 2017 | Dec. 31, 2016 | |||||||||
Effective tax rate | 34.90 | % | 32.41 | % | ||||||
Less: Tax Reform impact on effective tax rate | 7.39 | % | – | |||||||
Adjusted tax rate | 27.51 | % | 32.41 | % |
114 | MSCI | ANNEX B: SUPPLEMENTAL FINANCIAL INFORMATION |
Notes Regarding the Use ofNon-GAAP Financial Measures
MSCI has presented supplementalnon-GAAP financial measures as part of this Proxy Statement. A reconciliation is provided that reconciles eachnon-GAAP financial measure with the most comparable GAAP measure. Thenon-GAAP financial measures presented in this Proxy Statement should not be considered as alternative measures for the most directly comparable GAAP financial measures. Thenon-GAAP financial measures presented in this Proxy Statement are used by management to monitor the financial performance of the business, inform business decision making and forecast future results.
“Adjusted EBITDA,” a measure used by management to assess operating performance,EBITDA” is defined as net income before (1) income (loss) from discontinued operations, net of income taxes, (2) provision for income taxes, (3)(2) other expense (income), net, (4)(3) depreciation and amortization of property, equipment and leasehold improvements, (5)(4) amortization of intangible assets and, at times, (6)(5) certain other transactions or adjustments.adjustments, including impairment related to sublease of leased property and certain non-recurring acquisition-related integration and transaction costs.
“Adjusted EBITDA expenses” is defined as operating expenses less depreciation and amortization of property, equipment and leasehold improvements and amortization of intangible assets and, at times, certain other transactions or adjustments.adjustments, including impairment related to sublease of leased property and certain non-recurring acquisition-related integration and transaction costs.
“Adjusted net income” and “adjusted EPS” are defined as net income and diluted EPS, respectively, before theafter-tax impact ofof: the amortization of acquired intangible assets, including the amortization of the basis difference between the cost of the equity method investment and MSCI’s share of the net assets of the investee at historical carrying value, the impact related to costs associated with debt extinguishment, the impact related to certain non-recurring acquisition-related integration and transaction costs, the impact from impairment related to sublease of Tax Reform adjustmentsleased property, the impact related to gain from changes in ownership interest of equity method investee, and, at times, certain other
B-2 MSCI INC.2018 PROXY STATEMENT
ANNEX B
transactions or adjustments. For periods prior to first quarterWe also exclude the tax impact of adjustments for the Tax Cuts and Jobs Act that was enacted on December 22, 2017 the amortization(“Tax Reform”), except for certain amounts associated with capitalized software development costs was includedactive tax planning implemented as an adjustment to adjusted net income and adjusted EPS as it was not material.
“Adjusted tax rate” is defined as the effective tax rate excluding the impacta result of Tax Reform.
“Capex” is defined as capital expenditures plus capitalized software development costs.
“Free cash flow” is defined as net cash provided by operating activities, less Capex.
“Organic operating revenue growth” is defined as operating revenue growth compared to the prior year period excluding the impact of acquired businesses, divested businesses and foreign currency exchange rate fluctuations.
Asset-based fees adjusted for the impact of foreign currency exchange rate fluctuations does not adjust for the impact from foreign currency exchange rate fluctuations on the underlying assets under management.
We believe adjusted EBITDA and adjusted EBITDA expenses are meaningful measures of the operating performance of MSCI because they adjust for significantone-time, unusual ornon-recurring items as well as eliminate the accounting effects of certain capital spending and acquisitions that do not directly affect what management considers to be our coreongoing operating performance in the period.
We believe adjusted net income and adjusted EPS are meaningful measures of the performance of MSCI because they adjust for theafter-tax impact of significantone-time, unusual ornon-recurring items as well as eliminate the accounting effectsimpact of acquisitionsany transactions that do not directly affect what management considers to be our coreongoing operating performance in the period.
We believe that adjusted tax rate is useful to investors because it increasesalso exclude the comparability ofperiod-to-period results by adjusting for the estimated netafter-tax impact of Tax Reform.the amortization of acquired intangible assets and amortization of the basis difference between the cost of the equity method investment and MSCI’s share of the net assets of the investee at historical carrying value, as these non-cash amounts are significantly impacted by the timing and size of each acquisition and therefore not meaningful to the ongoing operating performance in the period.
We believe that free cash flow is useful to investors because it relates the operating cash flow of MSCI to the capital that is spent to continue and improve business operations, such as investment in MSCI’s existing products. Further, free cash flow indicates our ability to strengthen MSCI’s balance sheet, repay our debt obligations, pay cash dividends and repurchase shares of our common stock.
2022 PROXY STATEMENT | 115 |
We believe organic operating revenue growth is a meaningful measure of the operating performance of MSCI because it adjusts for the impact of foreign currency exchange rate fluctuations and excludes the impact of operating revenues attributable to acquired and divested businesses for the comparable prior year period, providing insight into our ongoing operating performance for the period(s) presented.
We believe that the non-GAAP financial measures presented in this Proxy Statement facilitate meaningful period-to-period comparisons and provide a baseline for the evaluation of future results.
Adjusted EBITDA expenses, Adjustedadjusted EBITDA, adjusted net income, adjusted EPS, adjusted tax rate, Capex, and free cash flow and organic operating revenue growth are not defined in the same manner by all companies and may not be comparable to similarly-titlednon-GAAP financial measures of other companies. These measures can differ significantly from company to company depending on, among other things, long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Accordingly, the Company’s computation of these measures may not be comparable to similarly titled measures computed by other companies.
Supplemental Information Regarding Aggregate Retention Rate and Run Rate
Retention Rate
Retention Rate is an important metric because subscription cancellations decrease our Run Rate and ultimately our future operating revenues over time. The Aggregateannual Retention Rate represents the retained subscription Run Rate (subscription Run Rate at the beginning of the fiscal year less actual cancels during the year) as a percentage of the subscription Run Rate at the beginning of the fiscal year.
The Retention Rate for a non-annual period is calculated by annualizing the cancellations for which we have received a notice of termination or for which we believe there is an intention not to renew or discontinue the subscription during the non-annual period, and we believe that such notice or intention evidences the client’s final decision to terminate or not renew the applicable agreement, even though such notice is not effective until a later date. This annualized cancellation figure is then divided by the subscription Run Rate at the beginning of the fiscal year to calculate a cancellation rate. This cancellation rate is then subtracted from 100% to derive the annualized Aggregate Retention Rate for the period. The Aggregate
Retention Rate is computed by operating segment on aproduct-by-product product/service-by-product/service basis. Therefore,In general, if a client reduces the number of products or services to which it subscribes within a segment, or switches between our products or services within a segment, we treat it as a cancellation.cancellation for purposes of calculating our Retention Rate except in the case of a product or service switch that management considers to be a replacement product or service. In those replacement cases, only the net change to the client subscription, if a decrease, is reported as a cancel. In the Analytics and the ESG and Climate operating segments, substantially all product or service switches are treated as replacement products or services and netted in this manner, while in our Index and Real Estate operating segments, product or service switches that are treated as replacement products or services and receive netting treatment occur only in certain limited instances. In addition, we treat any reduction in fees resulting from renegotiated contractsa down-sell of the same product or service as a cancellation in the calculation to the extent of the reduction. We do not calculate Retention Rate for that portion of our Run Rate attributable to assets in index-linked investment products or futures and options contracts, in each case, linked to our indexes.
Run Rate
“Run Rate”Rate is a key operating metric and is important because an increase or decrease in our Run Rate ultimately impacts our future operating revenues over time. At the end of any period, we generally have subscription and investment product license agreements in place for a large portion of total revenues for the following 12 months. We measure the fees related to these agreements and refer to this as “Run Rate.”
116 | MSCI | ANNEX B: SUPPLEMENTAL FINANCIAL INFORMATION |
Run Rate estimates at a particular point in time the annualized value of the recurring revenues under our client license agreements (“Client Contracts”) for the next 12 months, assuming all Client Contracts that come up for renewal, or reach the end of the committed subscription period, are renewed and assuming then-current currency exchange rates, subject to the adjustments and exclusions described below. For any Client Contract where fees are linked to an investment product’s assets or trading volume,volume/fees, the Run Rate calculation reflects, for ETFs, the market value on the last trading day of the period, for futures and options, the most recent quarterly volumes and/or reported exchange fees, and for othernon-ETF products, the most recent client-reported assets. Run Rate does not include fees associated with“one-time” “one-time” and othernon-recurring transactions. In addition, we add to Run Rate the annualized fee value of recurring new sales, whether to existing or new clients, when we execute Client Contracts, even though the license start date, and associated revenue recognition, may not be effective until a later date. We remove from Run Rate the annualized fee value associated with products or services under any Client Contract with respect to which we have received a notice of termination, non-renewal ornon-renewal an indication the client does not intend to continue their subscription during the period and have determined that such notice evidences the client’s final decision to terminate or not renew the applicable products or services, even though such notice is not effective until a later date.
Changes in our recurring revenues typically lag changes in Run Rate. The actual amount of recurring revenues we will realize over the following 12 months will differ from Run Rate for numerous reasons, including:
MSCI INC.2018 PROXY STATEMENT B-3
ANNEX B
● | fluctuations in revenues associated with new recurring sales; |
● | modifications, cancellations and non-renewals of existing Client Contracts, subject to specified notice requirements; |
● | differences between the recurring license start date and the date the Client Contract is executed due to, for example, contracts with onboarding periods or fee waiver periods; |
● | fluctuations in asset-based fees, which may result from changes in certain investment products’ total expense ratios, market movements, including foreign currency exchange rates, or from investment inflows into and outflows from investment products linked to our indexes; |
● | fluctuations in fees based on trading volumes of futures and options contracts linked to our indexes; |
● | fluctuations in the number of hedge funds for which we provide investment information and risk analysis to hedge fund investors; |
● | price changes or discounts; |
● | revenue recognition differences under U.S. GAAP, including those related to the timing of implementation and report deliveries for certain of our products and services; |
● | fluctuations in foreign currency exchange rates; and |
● | the impact of acquisitions and divestitures. |
Our Principles of Sustainable Investing
At MSCI, we believe ESG & climate factors will significantly impact financial assets and the daterisk and return of investments, which will lead to a large-scale re-allocation of capital over the Client Contract is executed duecoming years.
Given the significant and increasing impact that we expect ESG to exert on assets and the allocation of capital, MSCI urges all investors to integrate ESG considerations throughout their investment processes: to identify new investment opportunities, manage emerging risks and achieve long-term, sustainable investment performance.
The MSCI Principles of Sustainable Investing set forth our views on the core principles and best practices for example, contracts with onboarding periods;
ESG integration.
B-4To learn more visit msci.com/esg-investing
Information and reports on our website will not be deemed a part of, or otherwise incorporated by reference in, this Proxy Statement or any other report we file with the SEC.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. D66836-P67779 MSCI INC. Annual Meeting of Shareholders April 26, 2022 2:30 P.M. Eastern Time This proxy is solicited by the Board of Directors of MSCI Inc. The undersigned hereby appoints each of Cecilia Aza and Robert J. Gutowski as proxies of the undersigned, each with full power of substitution, to represent the undersigned and to vote as designated on the reverse side of this proxy card all of the shares of common stock of MSCI Inc. that the undersigned is entitled to vote at the Annual Meeting of Shareholders of MSCI Inc. to be held live via the Internet on April 26, 2022, at 2:30 P.M. Eastern Time, and at any adjournments or postponements thereof, upon all matters that may properly come before the meeting. You can virtually attend the meeting online by visiting www.virtualshareholdermeeting.com/MSCI2022. If no such direction is made, the proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side |