Adapting to RiskMetrics Group’s New Governance Risk Indicators System

In early February 2010, the highly-influential proxy advisory firm RiskMetrics Group ("RMG") announced it would no longer evaluate companies based upon its Corporate Governance Quotient ("CGQ"), but would instead use a new yardstick, called Governance Risk Indicators ("GRId"). GRId is intended to be more closely aligned with the principles underlying RMG's proxy voting policy.¹ On March 10, 2010, RMG released a detailed 188-page report explaining the GRId criteria and scoring methodology, which is being incorporated in proxy research reports now, beginning as of March 17, 2010.² GRId is intended to be both more transparent and more comprehensive than CGQ.

In comparison to the CGQ score, which was based upon a relative ranking of the corporate governance of peer companies in any given industry group against RMG's standards, the GRId system is intended to operate on an absolute basis so that companies are judged only on their own governance practices as compared with