MSCI & Aviva: Living in Glass Houses

I tagged this post (MSCI pays big dough to new CFO…) by Sonya Hubbard at Footnoted* a while back, mainly because I own a few shares of MSCI in my portfolio.

MSCI has promised to pay Qutub a guaranteed bonus of $1.6 million. The form of the bonus will be determined later, but the company’s letter stated that it “may be paid partially in cash and partially in a long-term equity-based incentive award (including, without limitation, restricted stock units, stock options, or performance units).”

But $2.1 million wasn’t enough to seal the deal. There’s more:

“You will receive a one-time equity-based award of MSCI restricted stock units valued at $1,000,000 to compensate you for performance-based compensation you will be forfeiting at your current employer as a result of your resignation.”

Given Bank of America’s performance over the past 8 years, it’s hard to imagine a scenario where Qutub’s RSUs were worth anything close to what they once were, so the language about forfeiting something valuable seems like a bit of a stretch.

The article goes on to explain more of the details but it seems fairly clear that MSCI is probably overpaying their new CFO. And then there’s this:

the British proxy firm Manifest gave MSCI a “D” for executive compensation because “the plan made it too easy for executives to win performance awards and lacked information about targets which could trigger additional pay.” While that type of criticism is often leveled by ISS – perhaps the best-known company in the U.S. that provides proxy advisory services – Reuters points out that MSCI owns ISS. Since ISS wanted to avoid a “potential conflict of interest,” the article states that ISS simply “sent clients research on MSCI’s proxy from Manifest.”

Wow, MSCI is living in a glass house. I bought the stock, in part, because they bought ISS and I thought they’d have really good governance in order to demonstrate they walk the talk. Not only are they failing on that front, returns have also been below average for its competition.

OK, fellow owners, according to Sharekrepellent.net, they have supermajority requirements, shareowners can’t call a special meeting or act by written consent and the filing date for resolutions is 11/19/2012.  Maybe a little light on the subject will help them put their house in order.

Of course, MSCI is not alone:

Aviva, a U.K.-based insurance group, suffered a humiliating vote against its proposed executive-pay plan at its annual general meeting in early May, the damage to the company’s reputation was so great that the chief executive felt compelled to resign. It’s a story with lessons for any CFO whose role involves investor relations or whose pay deal is open to a shareholder vote.

What’s particularly embarrassing for Aviva, however, is that its own trade body, the Association of British Insurers, had previously issued what’s called an “amber top alert,” drawing attention to concerns it had about the pay structures at the company.

Worse than that, as an institutional shareholder itself, Aviva has taken a stance and voted on hundreds of other companies’ remuneration reports. In what might be regarded as a case of “Do as I say, not as I do,” the company’s own investment-management arm has passed judgment on companies across Europe and around the world, and yet not found it possible to put together a boardroom pay structure that could garner majority support from other investors.

More at For Aviva, It’s Do as I Say, Not as I Do, CFO.com. Don’t these companies realize they are likely to come under additional scrutiny?

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