SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement | |||
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
☒ | Definitive Proxy Statement | |||
☐ | Definitive Additional Materials | |||
☐ | Soliciting Material under §240.14a-12 |
MOODY’S CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
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Dear Stockholder:
You are cordially invited to attend the 20182022 Annual Meeting of Stockholders of Moody’s Corporation to be held on Tuesday, April 24, 2018,26, 2022, at 9:30 a.m. EDTEDT. Due to ongoing public health concerns regarding the COVID-19 pandemic and for the health and well-being of our stockholders, directors, management and associates, the Board of Directors has directed that the 2022 Annual Meeting be held as a “virtual meeting” via the Internet. We have designed the format of the Annual Meeting to provide stockholders the same ability to participate that they would have at the Company’s offices at 7 World Trade Center at 250 Greenwich Street, New York, New York.an in-person meeting.
The Notice of Annual Meeting and Proxy Statement accompanying this letter describe the business to be acted upon at the meeting. The Annual Report for the year ended December 31, 20172021 is also enclosed.
On March 14, 2018,16, 2022, we mailed to many of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our 20182022 Proxy Statement and 20172021 Annual Report and vote online. The Notice included instructions on how to request a paper ore-mail copy of the proxy materials, including the Notice of Annual Meeting, Proxy Statement, Annual Report, and proxy card or voting instruction card. Stockholders who requested paper copies of the proxy materials or previously elected to receive the proxy materials electronically did not receive a Notice and will receive the proxy materials in the format requested.
Your vote is important. Whether or not you plan to attend the annual meeting, we encourage you to review the proxy materials and hope you will vote as soon as possible. You may vote by proxy over the Internet or by telephone by using the instructions provided in the Notice. Alternatively, if you requested and received paper copies of the proxy materials by mail, you can also vote by mail by following the instructions on the proxy card or voting instruction card. Voting over the Internet, by telephone or by written proxy or voting instruction card will ensure your representation at the annual meeting regardless of whether you attend in person.attend. Instructions regarding the three methods of voting are contained in the Notice or proxy card or voting instruction card.
Sincerely, | ||
Chairman of the Board |
President and Chief Executive Officer |
MOODY’S CORPORATION
7 World Trade Center
250 Greenwich Street
New York, New York 10007
NOTICE OF 20182022 ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
The 20182022 Annual Meeting of Stockholders of Moody’s Corporation will be held on Tuesday, April 24, 2018,26, 2022, at 9:30 a.m. EDTEDT. The 2022 Annual Meeting will be held virtually via the Internet at the Company’s offices at 7 World Trade Center at 250 Greenwich Street, New York, New York,www.virtualshareholdermeeting.com/MCO2022. The meeting will be held for the following purposes, all as more fully described in the accompanying Proxy Statement:
1. | To elect the |
2. | To ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the year |
3. | To vote on an advisory resolution approving executive compensation; and |
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To transact such other business as may properly come before the meeting. |
The Board of Directors of the Company has fixed the close of business on February 28, 20182022 as the record date for the determination of stockholders entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors, |
Corporate Secretary and Associate General Counsel |
March 14, 201816, 2022
IMPORTANT VOTING INFORMATION
Your Participation in Voting the Shares You Own Is Important
If you are the beneficial owner of your shares (meaning that your shares are held in the name of a bank, broker or other nominee), you may receive a Notice of Internet Availability of Proxy Materials from that firm containing instructions that you must follow in order for your shares to be voted. Certain institutions offer telephone and Internet voting. If you received the proxy materials in paper form, the materials include a voting instruction card so you can instruct the holder of record on how to vote your shares. The firm that holds your shares is not permitted to vote on the matters to be considered at the 20182022 Annual Meeting of Stockholders, other than to ratify the appointment of KPMG LLP, unless you provide specific instructions by following the instructions from your broker about voting your shares by telephone or Internet or completing and returning the voting instruction card. ForTo ensure that your vote to be counted in the election of directors,shares are voted on the advisory resolution approving executive compensation, and on the stockholder proposal,all items, you will need to communicate your voting decisions to your bank, broker or other holder of record before the date of the annual meeting.
Voting your shares is important to ensure that you have a say in the governance of the Company and to fulfill the objectives of the majority-voting standard that Moody’s Corporation applies in the election of directors. Please review the proxy materials and follow the relevant instructions to vote your shares. We hope you will exercise your rights and fully participate as a stockholder in the future of Moody’s Corporation.
More Information Is Available
If you have any questions about the voting of your shares, participating in the annual meeting or the proxy voting process in general, please contact the bank, broker or other nominee through which you hold your shares. The SEC also has a website (http:(http://www.sec.gov/spotlight/proxymatters.shtml)proxymatters.shtml) with more information about voting at annual meetings. Additionally, you may contact the Company’s Investor Relations Department by sending ane-mail toir@moodys.com.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 201826, 2022
The Proxy Statement and the Company’s 20172021 Annual Report to Stockholders are available athttps://materials.proxyvote.com/615369. Your vote is very important. Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet as instructed in the Notice of Internet Availability of Proxy Materials. Alternatively, if you received a paper copy of a proxy or voting instruction card by mail, you may submit your proxy or voting instruction card for the annual meeting by completing, signing, dating and returning your proxy or voting instruction card in thepre-addressed envelope provided. No postage is required if the card is mailed in the United States. If you attend the meeting, you may vote in person,during the meeting via the Internet, even if you have previously returned your proxy or voting instruction card or voted by telephone or the Internet. We will provide without charge to you a copy of the 2021 Annual Report on Form 10-K, upon written or oral request. You may direct such a request to us via e-mail to ir@moodys.com, or by submitting a written request to the Company’s Investor Relations Department, at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or contacting the Company’s Investor Relations Department by telephone, at (212) 553-4857.
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2022 ANNUAL MEETING OF STOCKHOLDERS
OF MOODY’S CORPORATION
This Proxy Statement is being furnished to the holders of the common stock, par value $0.01 per share (the “Common Stock”), of Moody’s Corporation (“Moody’s” or the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company (the “Board of Directors” or the “Board”) for use in voting at the 2022 Annual Meeting of Stockholders or any adjournment or postponement thereof (the “Annual Meeting”). The Annual Meeting will be held on Tuesday, April 24, 2018, at 9:30 a.m. EDT atThis summary highlights certain information from this Proxy Statement. You should read the Company’s principal executive offices located at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. To obtain directions to attend the Annual Meeting and vote in person, please contact the Company’s Investor Relations Department by sending ane-mail toir@moodys.com. entire Proxy Statement carefully before voting.
Date and Time | Place | Record Date | ||||||
Tuesday, April 26, 2022 9:30 a.m. EDT | Via the Internet at www.virtualshareholdermeeting.com/MCO2022 | February 28, 2022 |
This Proxy Statement and the accompanying proxy card are first being made available to stockholders on or about March 14, 2018.16, 2022. The Company’s telephone number is(212) 553-0300.
Annual Meeting AdmissionMATTERS TO BE VOTED ON AT THE ANNUAL MEETING
Stockholders will need an admission ticket to enter the Annual Meeting. For stockholders of record, an admission ticket is available over the Internet, or, if you requested paper copies, you will receive a printed proxy card and a printed admission ticket. If you plan to attend the Annual Meeting in person, please retain and bring the admission ticket.
If you are the beneficial owner of your shares (meaning that your shares are held in the name of a bank, broker or other nominee) and you plan to attend the Annual Meeting in person, you may obtain an admission ticket in advance by sending a written request, along with proof of share ownership such as a bank or brokerage account statement, to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. An admission ticket is also available over the Internet. Stockholders who do not have admission tickets will be admitted following verification of ownership at the door.
Items of Business | Board | Vote Required | ||||||||
Item 1 | Election of directors | FOR each nominee | Majority of votes cast | |||||||
Item 2 | Ratification of appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2022 | FOR | Majority of shares present and entitled to vote | |||||||
Item 3 | Advisory resolution approving executive compensation | FOR | Majority of shares present and entitled to vote |
Internet Availability of Proxy Materials
Under U.S. Securities and Exchange Commission (“SEC”) rules, we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to stockholders. On March 14, 2018, we mailed to our stockholders (other than those who previously requestede-mail or paper delivery) a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access and review our proxy materials, including this Proxy Statement and the Company’s Annual Report. These materials are available at: https://materials.proxyvote.com/615369. The Notice also instructs you on how to access your proxy card to vote through the Internet or by telephone.
This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting, and help conserve natural resources. If you received a Notice by mail, you will not receive a printed copy of the proxy materials unless you request one. If you would prefer to receive printed proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials viae-mail unless you elect otherwise.
The Board of Directors has fixed the close of business on February 28, 2018 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting. As of the close of business on the Record Date, there were 191,108,527 shares of Common Stock outstanding. Each holder of Common Stock entitled to vote at the Annual Meeting will be entitled to one vote per share.
How to VoteHOW TO VOTE IN ADVANCE OF THE VIRTUAL ANNUAL MEETING
In addition to voting in person at the Annual Meeting, stockholders of record can vote by proxy by following the instructions in the Notice of Internet Availability of Proxy Materials (the “Notice”) and using the Internet or by calling the toll-free telephone number that is available onin the Internet.Notice. Alternatively, stockholders of record who requested a paper copy of the proxy materials can vote by proxy by mailing their signed proxy cards. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their voting instructions and to confirm that stockholders’ instructions have been recorded properly.
If your shares are held in the name ofa “street name” (that is, through a bank, broker or other nominee,nominee), you may receive a Notice from that firm containing instructions that you must follow in order for your shares to be voted. Certain institutions offer telephone and Internet voting. If you received the proxy materials in paper form, the materials include a voting instruction card so you can instruct the holder of record on how to vote your shares. If you wishFor additional information, including voting procedures for certain current and former employees, see “Information about the Annual Meeting, Proxy Voting and Other Information” on page 75.
MOODY’S 2022 PROXY STATEMENT | 1 |
HOW TO PARTICIPATE IN THE ANNUAL MEETING
Stockholders of record as of the close of business on February 28, 2022, the record date, are entitled to participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote, ask questions, and view the list of registered stockholders as of the record date during the meeting, you must go to the meeting website at www.virtualshareholdermeeting.com/MCO2022, enter the control number found on your proxy card, voting instruction card or the Notice, and follow the instructions on the website. The meeting webcast will begin promptly at 9:30 a.m. EDT. If your shares are held in personstreet name and your voting instruction card or Notice indicates that you may vote those shares through the www.proxyvote.com website, then you may access, participate in, and vote at the Annual Meeting you must obtain a legal proxy fromwith the16-digit access code indicated on that voting instruction card or Notice. Otherwise, stockholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting. Online check-in will begin approximately 15 minutes prior, and we encourage you to allow ample time for check-in. If you experience technical difficulties during the check-in process, or at any time during the Annual Meeting, please call 844-986-0822 (U.S.) or +1 303-562-9302 (international) for technical support.
Moody’s will endeavor to respond during the Annual Meeting to as many stockholder-submitted questions as time permits that holds your shares.comply with the meeting rules of conduct. We will post answers to all proper stockholder questions (whether or not answered during the meeting) received regarding our Company on our Investor Relations website at moodys.com under the headings “About Us—Investor Relations” as soon as is practicable following the meeting.
Special Voting ProceduresRules for Certain Current and Former Employees
Many current and former employeesthe conduct of the Company have share balances inAnnual Meeting will be available on the Moody’s Common Stock Fundmeeting website. In addition, for information about how to view the rules and the list of the Moody’s Corporation Profit Participation Plan (the “Profit Participation Plan”). The voting procedures described above do not apply to these share balances. Instead, any proxy given by such an employee or former employee will serve as a voting instruction for the trustee of the Profit Participation Plan, as well as a proxy for any shares registered in that person’s own name (including shares acquired under the Moody’s Corporation Employee Stock Purchase Plan and/or pursuant to restricted stock awards). To allow sufficient time for voting by the trustee, Profit Participation Plan voting instructions must be received by April 19, 2018. If voting instructions have not been received by that date, or properly completed and executed voting instructions are not provided, the trustee will vote those Profit Participation Plan shares in the same proportion as the Profit Participation Plan shares for which it has received instructions, except as otherwise required by law.
Quorum and Voting Requirements
The holders of a majority of the outstanding shares of Common Stockstockholders entitled to vote at the Annual Meeting whether present in person or represented by proxy, will constitute a quorum forduring the transaction of business at the Annual Meeting. If a quorum is not present atten days preceding the Annual Meeting, please visit our Company’s website at moodys.com under the stockholders present may adjourn the Annual Meeting from timeheadings “About Us—Investor Relations—Corporate Governance.”
CORPORATE GOVERNANCE HIGHLIGHTS
Board Independence | Executive Compensation Governance Practices | |||
✓ Separate roles for non-executive Chairman of the Board and CEO, and empowered Lead Independent Director ✓ Eight of 10 Board members are independent ✓ Fully independent Audit, Governance & Nominating, and Compensation & Human Resources Committees ✓ Regular executive sessions of independent directors | ✓ Robust stock ownership guidelines, with retention requirements, for directors and executive officers ✓ Comprehensive clawback policy ✓ Minimum one-year vesting period generally applicable to incentive equity awards ✓ Anti-hedging and anti-pledging policy |
2 | MOODY’S 2022 PROXY STATEMENT |
Other Board Practices |
✓ All directors elected annually by majority vote (in uncontested elections) ✓ Annual evaluations of the Board, committees and individual directors ✓ Board composition reflects diversity in gender and ethnicity, and includes a range of tenures to balance fresh perspectives with in-depth knowledge about the Company |
The Company strives to time, without notice, other than by announcement at the meeting, untilmaintain a quorum is present or represented. At any such adjourned meeting at whichBoard that possesses a quorum is present or represented, any business may be transacted that might have been transacted at the original meeting. Abstentionscombination of skills, professional experience, and brokernon-votes will be counted for purposesdiversity of determining whether a quorum is present at the Annual Meeting. A broker“non-vote” occurs when a nominee (such as a bank, broker or other nominee) holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular matterbackgrounds and has not received instructions from the beneficial owner.
Director Elections. Pursuanttenure necessary to effectively oversee the Company’sby-laws, the nominees for director are required to receive a majority business. As part of the votes cast with respect to such nominees in order to be elected at the Annual Meeting. A majority of the votes cast means that the number of shares voted “for” asearch process for each new director, must exceed the number of votes cast “against” that director. Abstentions have no effect on the election of directors. Brokers do not have discretionary authority to vote shares in the election of directors without
instructions from the beneficial owner. Accordingly, shares resulting in brokernon-votes, if any, are not votes cast and will have no effect on the outcome of director elections. In accordance with the Company’s Director Resignation Policy, each director subject to election at the Annual Meeting was required to submit a contingent resignation that the Board of Directors will consider, following a review and recommendation from the Governance & Nominating Committee includes women and minorities in the event thatpool of candidates and instructs any search firm the Committee engages to do so (often called a “Rooney Rule”). One director fails to receivenominee has identified himself as Hispanic/Latino and a majority ofsecond nominee as Black/African American. All ten directors currently serving, including Zig Serafin, who was elected director by the votes cast.
Ratification of the Appointment of the Independent Registered Public Accounting Firm. The affirmative vote of the majority of the shares present in person or represented by proxy and entitled to voteBoard effective July 14, 2021, are standing for election at the Annual Meeting is required to ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018. If a stockholder abstains from voting or directs the stockholder’s proxy to abstain from voting on this matter, the abstention has the same effect as a vote against the matter. Brokers have discretionary authority to vote shares on this matter if they do not receive instructions from the beneficial owner.
Advisory Resolution Approving Executive Compensation. The affirmative vote of the majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the advisory resolution approving executive compensation. The resolution is advisory, meaning that it is not binding on the Board, although the Board will consider the outcome of the vote on this resolution. If a stockholder abstains from voting or directs the stockholder’s proxy to abstain from voting on the matter, the abstention has the same effect as a vote against the matter. Brokers do not have discretionary authority to vote shares on the matter without instructions from the beneficial owner. Accordingly, shares resulting in brokernon-votes, if any, are not entitled to vote on the matter and will have no effect on the outcome of the vote.
Stockholder Proposal. The affirmative vote of the majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the stockholder proposal set forth in this Proxy Statement. Please bear in mind that approval of the stockholder proposal included in this Proxy Statement would serve only as a recommendation to the Board of Directors to take the actions requested by the proponent. If a stockholder abstains from voting or directs the stockholder’s proxy to abstain from voting on the stockholder proposal, the abstention has the same effect as a vote against the proposal. Brokers do not have discretionary authority to vote shares on the stockholder proposal without instructions from the beneficial owner. Accordingly, shares resulting in brokernon-votes, if any, are not entitled to vote for the proposal and will have no effect on the outcome of the vote.
The proxy provides that you may specify that your shares of Common Stock be voted “For,” “Against” or “Abstain” from voting with respect toMeeting. Information regarding the director nominees and the other proposals. The Boardis provided below.
Director Skills Distribution |
Two of Directors recommends that you vote “For” the director nominees, named in this Proxy Statement, “For”including the ratificationChairman of the selection of the independent registered public accounting firm, “For” the advisory resolution approving executive compensation,Audit Committee, have a cybersecurity and “Against” the stockholder proposal. All shares of Common Stock represented by properly executed proxies received prior to or at the Annual Meeting and not revoked will be voted in accordanceinformation systems background.
MOODY’S 2022 PROXY STATEMENT | 3 |
Director Nominee | Audit | Governance & Nominating | Compensation & Human Resources | Executive | ||||||||||||||||||||||||||||||||
Jorge A. Bermudez Retired Chief Risk Officer, Citigroup, Inc. | ✓ | M | M | M | ||||||||||||||||||||||||||||||||
Thérèse Esperdy Retired Global Chairman of Financial Institutions Group, JPMorgan Chase & Co. | ✓ | M | M | M | ||||||||||||||||||||||||||||||||
Robert Fauber | M | |||||||||||||||||||||||||||||||||||
Vincent A. Forlenza Lead Independent Director, Moody’s Retired Chief Executive Officer, Becton, | ✓ | M | C | M | M | |||||||||||||||||||||||||||||||
Kathryn M. Hill Retired Senior Vice President, Cisco Systems, Inc. | ✓ | M | M | C | M | |||||||||||||||||||||||||||||||
Lloyd W. Howell, Jr. Executive Vice President, Chief Financial Officer and Treasurer, Booz Allen Hamilton | ✓ | M | M | M | ||||||||||||||||||||||||||||||||
Raymond W. McDaniel, Jr. Non-executive Chairman of the Board, Moody’s Corporation | C | |||||||||||||||||||||||||||||||||||
Leslie F. Seidman Former Chairman, Financial Accounting Standards Board | ✓ | C | M | M | M | |||||||||||||||||||||||||||||||
Zig Serafin Chief Executive Officer, Qualtrics International Inc. | ✓ | M | M | M | ||||||||||||||||||||||||||||||||
Bruce Van Saun Chairman and Chief Executive Officer, Citizens Financial Group, Inc. | ✓ | M | M | M |
✓ Independent C: Chairman M: Member
4 | MOODY’S 2022 PROXY STATEMENT |
Moody’s manages its business with the instructions indicatedgoal of delivering value to all of its stakeholders, including its customers, employees, business partners, local communities and stockholders. Moody’s advances its commitment to sustainability by considering environmental, social, and governance (“ESG”) factors throughout its operations and products and services. It uses its expertise and assets to make a positive difference through technology tools, research and analytical services that help other organizations and the investor community better understand the links between sustainability considerations and the global markets. Moody’s efforts to help market participants evaluate risk by integrating ESG considerations into capital allocations and long-term planning include the following:
• | formed Moody’s ESG Solutions to align its product and service offerings to meet the growing global demand for ESG capabilities |
• | acquired RMS, a leading global provider of climate and natural disaster risk modeling and analytics |
Moody’s efforts to promote sustainability-related thought leadership, assessments and data to market participants include following the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate and assess performance, including the Global Reporting Initiative (“GRI”) and the Sustainability Accounting Standards Board (“SASB”). The Company also issues an annual report on how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. Moody’s sustainability-related achievements in such proxies. Properly executed proxies that do not contain voting instructions will be voted in accordance with2021 included the recommendationsfollowing:
• | recognized as a 2021 Global Compact LEAD company for its ongoing commitment to the United Nations Global Compact and its Ten Principles for responsible business |
• | recognized with CDP’s ‘A’ Score on Climate Action for the second consecutive year, making Moody’s one of a small number of high-performing companies out of nearly 12,000 that are leading actions to cut emissions, mitigate climate risks and develop the low-carbon economy |
• | released its inaugural Stakeholder Sustainability Report, which details Moody’s focus on sustainability and its progress toward incorporating ESG considerations across its products and corporate operations |
• | joined the Taskforce on Nature-related Financial Disclosures (“TNFD”) to help develop a reporting framework and act on evolving nature-related risks |
2020 Decarbonization Plan—Advisory Say-on-Climate Resolution
Last year, the Board determined to submit the Company’s 2020 Decarbonization Plan (the “2020 Plan”) to a vote of Directors, except as noted abovestockholders following the Company’s discussions with respect to shares held in the Profit Participation Plan.
It is not expected that any matter other than those referred to herein will be brought before the Annual Meeting. If, however, other matters are properly presented, the persons named as proxies will vote in accordance with their best judgment with respect to such matters.
Any stockholder of record who votes by telephone or the Internet or who executes and returns a proxy may revoke such proxy or change such vote at any time before it is voted at the Annual Meeting by (i) filing with the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, written notice of such revocation, (ii) casting a new vote by telephone or the Internet or by submitting another proxy that is properly signed and bears a later date or (iii) attending the Annual Meeting and voting in person. A stockholder whose shares are owned beneficially through a bank, broker or other nominee should contact that entity to change or revoke a previously given proxy.
Proxies are being solicited herebyTCI Fund Management Limited on behalf of the Boardstockholder The Children’s Investment Master Fund. The 2020 Plan outlines our current science-based targets and strategies for realizing the Company’s climate ambitions, including the procurement of Directors. The cost100% of renewable electricity for the Company’s office spaces and optimizing efficiencies in its operations through a “Workplace of the proxy solicitation will be borne byFuture”. The 2020 Plan received the Company, although stockholders who vote by telephone or the Internet may incur telephone or Internet access charges. In addition to solicitation by mail, directors, officers and employeessupport of 93% of the Company may solicit proxies personally or by telephone, telecopy,e-mail or otherwise. Such directors, officersshares voted, which underscored that climate considerations and employees will not be specifically compensatedaction are now an integral part of the Company’s business strategy, governance, and corporate performance.
MOODY’S 2022 PROXY STATEMENT | 5 |
As part of last year’s proposal, we also announced our intention to annually report on Moody’s assessment of our greenhouse gas (“GHG”) levels, our plan for such services.reducing our GHG emissions, and our progress against that plan. The Company has retained Georgeson Shareholder Communicationsimplemented a number of initiatives to execute on the 2020 Plan, including the following:
Committing to achieve net-zero emissions across its operations and value chain by 2040, bringing its original target forward by 10 years;
Contracting towards meeting the Company’s 100% renewable electricity commitment for 2021;
Promoting energy efficiency through office programs aimed at energy conservation;
Expanding the Company’s engagement with suppliers relating to decarbonization from approximately 300 in 2020 to approximately 500 in 2021;
Procuring carbon offsets to match the remainder of our emissions from Scope 1, Scope 2, business travel and employee commuting;
Continuing to actively engage with stakeholders on climate-related issues; and
Updating the Company’s environmental sustainability, privacy and supplier policies to reflect the heightened expectations for both the Company and its partners.
Additional details on the Company’s progress will be disclosed as part of its 2021 TCFD report and 2022 CDP response.
Board Oversight of Sustainability Matters
The Board oversees sustainability matters, with assistance from the Audit, Governance & Nominating and Compensation & Human Resources Committees, as part of its oversight of management and the Company’s overall strategy. The Board also oversees Moody’s policies for assessing and managing the Company’s exposure to risk, including climate-related risks such as business continuity disruption and reputational or credibility concerns stemming from incorporation of climate-related risks into the credit methodologies and credit ratings of Moody’s Investors Service, Inc. to assist(“Moody’s Investors Service” or “MIS”).
Audit Committee. Oversees financial, risk, accounting and other disclosures made in the Company’s annual and quarterly reports related to sustainability. Governance & Nominating Committee. Oversees sustainability matters, including significant issues of corporate social and environmental responsibility, as they pertain to the Company’s business and to long-term value creation for the Company and its stockholders, and makes recommendations to the Board regarding these issues. Compensation & Human Resources Committee. Oversees inclusion of sustainability-related performance goals for determining compensation of certain senior executives (including the Named Executive Officers (as defined below)). | ||||
Expanded voluntary sustainability disclosure in its Form 10-K and 10-Qs Development of a robust ESG strategy for the Company More fully integrated sustainability-related performance metrics into the Strategic & Operational compensation metric of all senior executives | ||||
6 | MOODY’S 2022 PROXY STATEMENT |
DIVERSITY, EQUITY AND INCLUSION
The Board also oversees diversity, equity and inclusion (“DE&I”) matters, with assistance from the solicitation of proxies for a fee not to exceed approximately $15,000, plus reimbursement forout-of-pocket expenses. Arrangements may also be made with custodians, nominees and fiduciaries to forward proxy solicitation materialsCompensation & Human Resources Committee. Management periodically presents to the beneficial ownersdirectors on relevant topics, including diversity talent and DE&I matters more generally. In 2021, the Board oversaw the Company’s expanded public disclosure regarding DE&I matters in addition to the human capital management disclosure in the Company’s Annual Report and this Proxy Statement, as well as the public disclosure of shares of Common Stock held of record by such custodians, nomineesits 2020 EEO-1 Report. The Company’s DE&I efforts aim to drive positive impact across our workforce, workplace, customers and fiduciaries, andcommunities. Recent Moody’s DE&I efforts included the Company may reimburse such custodians, nominees and fiduciaries for their reasonableout-of-pocket expenses incurred in connection therewith.following:
• | Established and enhanced employee programs, including launching a high potential initiative for women and diverse leaders and transforming the Senior Women Leadership Development Program |
• | became one of the first companies to sign up to the new Black Equity at Work Certification |
• | Committed $1 million over five years to promote equal justice and advancement of the Black community |
• | Launched Moody’s Multicultural Customer Initiative, which seeks to bring financial opportunities and economic revitalization to underserved communities |
Delivery of Documents to Stockholders Sharing an AddressHUMAN CAPITAL
If you areThe Board also oversees human capital matters, with assistance from the beneficial owner, but not the record holder, of the Company’s shares, your broker, bank or other nominee may seek to reduce duplicate mailings by delivering only one copy of the Company’s Proxy StatementCompensation & Human Resources Committee. As a global integrated risk assessment firm, attracting, supporting and Annual Report, or Notice, as applicable, to multiple stockholders who share an address unless that nominee has received contrary instructions from one or more of the stockholders. The Company will deliver promptly, upon written or oral request, a separate copy of the Proxy Statement and Annual Report, or Notice, as applicable, to a stockholder at a shared address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of the Proxy Statement and Annual Report, or Notice, as applicable, now or in the future, should submit his request to the Company by sending ane-mail toir@moodys.com, by submitting a written requestretaining skilled talent is essential to the Company’s Investor Relations Department, at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or contactingsuccess. Moody’s addresses these goals by: (i) promoting DE&I among employees; (ii) seeking to provide market-competitive compensation and benefits and rewarding employees for their contributions to the Company’s Investor Relations Department by telephone, at(212) 553-4857. Beneficial owners sharing an address who are receiving multiple copies of the Proxy Statementstrategic and Annual Report, or Notice, as applicable,operational goals; (iii) offering wellness programs; (iv) supporting employee learning, development and wish to receive a single copy of such materials in the future should contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future. Please note that if you wish to receive paper proxy materials for the 2018 Annual Meeting, you should follow the instructions contained in the Notice.skills enhancement; and (v) advancing employee engagement.
MOODY’S 2022 PROXY STATEMENT | 7 |
| DE&I | The Company’s key objectives include: (i) incorporating DE&I into Moody’s business strategy; (ii) establishing leadership accountability with respect to diversity including through executive compensation programs; (iii) working to increase diverse representation, e.g., women and ethnic groups; (iv) continuing to advance women and ethnically diverse employees in leadership roles; (v) enhancing employee training in diversity and inclusion matters; (vi) promoting equal employment opportunities in all aspects of employment; (vii) designing the Company’s compensation practices to provide equal pay for equal work; and (vii) incorporating market standards, role, experience and performance into compensation decisions. The executive leadership team’s focus on these items is vital to attract, support and retain its skilled talent. | ||||||||||||||||
Moody’s compensation programs are designed to foster and maintain a strong, capable, experienced and motivated global workforce. An important element of the Company’s compensation philosophy is aligning compensation to local market standards so that it can attract and retain the highly-skilled talent needed to thrive. Compensation is determined by factoring in both the Company’s financial performance as well as a qualitative assessment of strategic and operational metrics tied to key non-financial business objectives. | Compensation | |||||||||||||||||
Benefits and Wellness Programs | Moody’s is committed to providing competitive benefits programs designed to care for all employees and their families. The Company’s comprehensive programs offer resources for physical and mental health that promote preventive care and awareness and support a healthy lifestyle. The Company also promotes financial wellness and provides for flexible work arrangements. Beyond delivering health, welfare, retirement benefits, and paid vacation and sick days, the Company extends other benefits to supports its employees and their families. | |||||||||||||||||
The Company views learning and education as an investment in its people that aligns their professional goals and interests with the success of the firm, and helps to retain talent over the longer-term. A number of training programs are available, including leadership development, professional skills development, technical skills, as well as compliance training. | Learning & Development | |||||||||||||||||
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In order to address evolving best practices and new regulatory requirements, the Board of Directors reviews its corporate governance practices and the charters for its standing committees at least annually. As a result ofAfter performing its annual governance review for 2017,2021, the Board amendeddetermined to amend the Company’s Audit Committee charter. The Board also determined that no amendments were needed to the Company’s Corporate Governance Principles and its Audit andcharters for the Governance & Nominating, Committee Charters.Compensation & Human Resources and Executive Committees. A copy of the Corporate Governance Principles is available on the Company’s website atwww.moodys.com under the headings “About Moody’s—Us—Investor Relations—Investor Relations Home—Corporate Governance—Charter Documents—Other Governance Documents.” Copies of the charters of the Audit Committee, the Governance & Nominating Committee, the Compensation & Human Resources Committee, the Audit Committee and the Executive Committee are available on the Company’s website at www.moodys.com under the headings “About Moody’s—Us—Investor Relations—Investor Relations
Home—Corporate Governance—Charter Documents.” Print copies of the Corporate Governance Principles and the committee charters may also be obtained upon request, addressed to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. The Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee assist the Board in fulfilling its responsibilities, as described below. The Executive Committee has the authority to exercise the powers of the Board when it is not in session (subject to applicable law, rules and regulations, and the Company’s Restated Certificate of Incorporation andBy-Laws), advises management and performs other duties delegated to it by the Board from time to time.
Board Meetings and CommitteesBOARD MEETINGS AND COMMITTEES
During 2017,2021, the Board of Directors met eight14 times. The Board had four standing committees: an Audit Committee, a Governance & Nominating Committee, a Compensation & Human Resources Committee and an Executive Committee. All incumbent directors attended at least 84%more than 85% of the total number of meetings of the Board and of all Board committees of the Board on which they served in 2017.2021.
Please refer to page 1017 for additional information regarding the Audit Committee, page 1220 for additional information regarding the Governance & Nominating Committee and page 1320 for additional information regarding the Compensation & Human Resources Committee. The Executive Committee did not meet in 2017.
2021. Directors are encouraged to attend the Annual Meeting. All ofindividuals elected to the individuals serving as directorsBoard at the timeCompany’s 2021 annual meeting of the Company’s 2017 Annual Meetingstockholders attended the meeting.
Recommendation of Director CandidatesRECOMMENDATION OF DIRECTOR CANDIDATES
The Governance & Nominating Committee considers and makes recommendations to the Board regarding the size, structure, composition and functioning of the Board and engages in succession planning for the Board and key leadership roles on the Board and its committees. The Governance & Nominating Committee is also responsible for overseeing the processes for the selection and nomination of director candidates,candidates. The Governance & Nominating Committee periodically reviews the skills, experience, characteristics and other criteria for developing, recommendingidentifying and evaluating directors, and recommends these criteria to the Board for approval, and periodically reviewing Board membership criteria.Board. The Governance & Nominating Committee will consider director candidates recommended by stockholders of the Company.Company and may also engage independent search firms from time to time to assist in identifying and evaluating potential director candidates. In considering a candidate for Board membership, whether proposed by stockholders or otherwise, the Governance & Nominating Committee examines the candidate’s business experience, qualifications, attributes and skills relevant to the management and oversight of the Company’s business, independence, the ability to represent diverse stockholder interests, judgment, integrity, the ability to commit sufficient time and attention to Board activities, and the absence of any potential conflicts with the Company’s business
MOODY’S 2022 PROXY STATEMENT | 9 |
and interests. The Committee also seeks diverse occupational and personal backgrounds for the Board. See “Qualifications and Skills of Directors” on page 1927 and “Director Nominees” beginning on page 28 for additional information on the Company’s directors. To have a candidate considered by the Governance & Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information:
The name of the stockholder and evidence of the stockholder’s ownership of Company stock, including the number of shares owned and the length of time of ownership; and
The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company, and the candidate’s consent to be named as a director if selected by the Governance & Nominating Committee and nominated by the Board.
The stockholder recommendation and information described above must be sent to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or emailed to corporatesecretary@moodys.com, and must be received by the Corporate Secretary not lesslater than 120 days prior to the first anniversary date of the Company’s most recentdate the definitive proxy statement was first released to stockholders in connection with the preceding year’s annual meeting of stockholders. For the Company’s 20192023 annual meeting of stockholders, this deadline is December 25, 2018.November 16, 2022.
The Governance & Nominating Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons meetingwho meet the criteria described above whoand might be available to serve on the Board. As described above, the Committee will also consider candidates recommended by stockholders on the same basis as those recommended by current directors and executives.from other sources. The Governance & Nominating Committee, also, from time to time, may engagealso engages third party search firms that specialize in identifying director candidates for the Committee’s consideration.
Once a person has been identified by or for the Governance & Nominating Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Governance & Nominating Committee determines that the candidate warrants further consideration, the chairman or another member of the Committee contacts the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Governance & Nominating Committee requests information from the candidate, reviews the candidate’s accomplishments and qualifications, including in light of any other candidates whom the Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments.
Board Leadership StructureDIRECTOR EDUCATION
The Company provides all new directors with an initial orientation session, which includes a comprehensive overview of the Company and the opportunity to meet with key leaders of the organization such as the Chief Executive Officer, Chief Financial Officer, General Counsel, the Presidents of MIS and Moody’s Analytics, Inc. (“Moody’s Analytics” or “MA”), the Chief Strategy Officer, the Chief Audit Executive, the Chief Information Officer and the Controller. This orientation includes, among other topics, an overview of the Company’s business, including MIS and MA, corporate governance, compliance program, strategy, technology and cybersecurity, enterprise risk management, and legal and regulatory matters.
Board and committee meetings, industry and corporate governance update presentations, periodic reports from the Company’s businesses and external training programs also provide the
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Company’s directors with continuing education throughout their tenure. In 2021, outside counsel presented to the Board regarding board oversight considerations with respect to ESG trends and developments. The Company reimburses directors for expenses associated with attendance at external education programs.
The Board periodically reviews its leadership structure to evaluate whether the structure remains appropriate and make a determination regarding whether or not to separate the roles of Chairman and Chief Executive Officer based upon the circumstances. The Company’s Corporate Governance Principles permit the roles of Chairman and Chief Executive Officer to be filled by a single person or different individuals. This flexibility allows the Board to review the structure of the Board periodically and determine whether to separate the two roles based upon the Company’s needs and circumstances from time to time.
Dr. McKinnell serves as ChairmanIn 2021, in connection with the retirement of the Board and Mr. McDaniel serves as President and Chief Executive Officer of Moody’s Corporation. In 2011 and 2012,the Company, the Board discussed whetherelected Mr. McDaniel to separate the roles, taking into account numerous considerations that bear upon the issue, including stockholders’ support at the Company’s 2011 annual meeting of a stockholder proposal recommending that, whenever possible, the Company’s chairman be independent. In light of these considerations, the Board determined to appoint an independentserve as Chairman of the Board. The Board believesIn addition, in light of the Board’s continued belief that strong, independent Board leadership is a critical aspect of effective corporate governance. governance, the Board amended the Corporate Governance Principles to provide that, whenever and for so long as the Chairman is not an independent director, the independent directors will appoint an independent director to serve as the Lead Independent Director. In 2021, the independent directors appointed Mr. Forlenza to serve as Lead Independent Director for a term expiring at the Annual Meeting.
The role of Lead Independent Director is designed to support the Company’s strong, independent Board leadership and responsibilitiesenhance candor and communication between the independent members of the Board, the non-executive Chairman, and the Company’s Chief Executive Officer. In support of this goal, the Lead Independent Director has a robust set of responsibilities, including:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Setting the agenda for executive sessions;
Reviewing and approving the agenda, materials, and schedule for Board meetings, as well as other information sent to the Board;
Serving as principal liaison among the independent directors and on Board-wide issues between the independent directors and the Chairman or Chief Executive Officer; and
Being available for consultation and communication with major stockholders, as appropriate.
In addition to Mr. Forlenza’s role as Lead Independent Director, he also serves as Chairman of the Board are detailed in the Company’s Corporate Governance Principles.& Nominating Committee.
Codes of Business Conduct and EthicsCODES OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a code of ethics that applies to its Chief Executive Officer, Chief Financial Officer and Controller, or persons performing similar functions. The Company has also adopted a code of business conduct and ethics that applies to the Company’s directors, officers and employees. A current copy of each of these codes is available on the Company’s website atwww.moodys.com under the headings “About Moody’s—Us—Investor Relations—Investor Relations Home—Corporate Governance—Charter Documents—Other Governance Documents.” A copy of each is also available in print to stockholders upon request, addressed to the Corporate Secretary of the Company at 7 World Trade
MOODY’S 2022 PROXY STATEMENT | 11 |
Center at 250 Greenwich Street, New York, New York 10007. The Company intends to satisfy disclosure requirements regarding any amendments to, or waivers from, the codes of ethics by posting such information on the Company’s website atwww.moodys.com under the headings “About Moody’s—Us—Investor Relations—Investor Relations Home—Corporate Governance—Charter Documents—Other Governance Documents.”
Director IndependenceDIRECTOR INDEPENDENCE
To assist it in making determinations of a director’s independence, the Board has adopted independence standards that are set forth below and are included in the Company’s Corporate Governance Principles. The Board has determined that Mr. Anderson,Bermudez, Ms Esperdy, Mr. Bermudez, Dr. Duffie,Forlenza, Ms Hill, Mr. Kist, Dr. McKinnell,Howell, Ms Seidman, Mr. Serafin and Mr. Van Saun and thus a majority of the directors on the Board, are independent under these standards. TheIn addition, the Board has alsohad previously determined that Messrs. ForlenzaMr. Anderson and Zalm, director candidates, are independent.Dr. McKinnell, who retired from the Board effective April 20, 2021, the date of Moody’s 2021 annual meeting, were independent under these standards. The standards adopted by the Board incorporate the director independence criteria included in the New York Stock Exchange (the “NYSE”) listing standards, as well as additional criteria established by the Board. The Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee are composed entirely of independent directors. Should Messrs. Forlenza and Zalm be elected, the Board intends to appoint them to the Audit, Governance & Nominating, and Compensation & Human Resources Committees. In accordance with NYSE requirements and the independence standards adopted by the Board, all members of the Audit Committee and the Compensation & Human Resources Committee meet additional heightened independence standards applicable to audit committee and compensation committee members.
An “independent” director is a director whom the Board has determined has no material relationship with the Company or any of its consolidated subsidiaries (for purposes of this section, collectively referred to as the “Company”), either directly, or as a partner, stockholder or officer of an organization that has a relationship with the Company. For purposes of this definition, the Board has determined that a director is not independent if:
1. | the director is, or in the past three years has been, an employee of the Company, or an immediate family member of the director is, or in the past three years has been, an executive officer of the Company; |
2. | (a) the director, or an immediate family member of the director, is a current partner of the Company’s outside auditor; (b) the director is a current employee of the Company’s outside auditor; (c) a member of the director’s immediate family is a current employee of the Company’s outside auditor and personally works on the Company’s audit; or (d) the director or an immediate family member of the director was in the past three years a partner or employee of the Company’s outside auditor and personally worked on the Company’s audit within that time; |
3. | the director, or a member of the director’s immediate family, is or in the past three years has been, an executive officer of another company where any of the Company’s present executive officers serves or served on the compensation committee at the same time; |
4. | the director, or a member of the director’s immediate family, has received, during any12-month period in the past three years, any direct compensation from the Company in excess of $120,000, other than compensation for Board service, compensation received by the director’s immediate family member for service as an employee (other than an executive officer) of the Company, and pension or other forms of deferred compensation for prior service with the Company; |
5. | the director is a current executive officer or employee, or a member of the director’s immediate family is a current executive officer of another company that makes payments to |
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or receives payments from the Company, or during any of the last three fiscal years, has made payments to or received payments from the Company, for property or services in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues; or |
6. | the director, or the director’s spouse, is an executive officer of anon-profit organization to which the Company or the Company foundation makes, or in the past three years has made, contributions that, in any single fiscal year, exceeded the greater of $1 million or 2% of thenon-profit organization’s consolidated gross revenues. (Amounts that the Company |
foundation contributes under matching gifts programs are not included in the contributions calculated for purposes of this standard.) |
An “immediate family” member includes a director’s spouse, parents, children, siblings, mother- andfather-in-law, sons- anddaughters-in-law, brothers- andsisters-in-law, and anyone (other than a domestic employee) who shares the director’s home.
In addition, a director is not considered independent for purposes of serving on the Audit Committee, and may not serve on the Audit Committee, if the director: (a) accepts, directly or indirectly, from Moody’s Corporation or any of its subsidiaries, any consulting, advisory, or other compensatory fee, other than Board and committee fees and fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with Moody’s Corporation; or (b) is an “affiliated person” of Moody’s Corporation or any of its subsidiaries; each as determined in accordance with SECU.S. Securities and Exchange Commission (“SEC”) regulations.
Furthermore, in determining whether a director is considered independent for purposes of serving on the Compensation & Human Resources Committee, the Board must consider all factors specifically relevant to determining whether the director has a relationship with the Company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (a) the source of the director’s compensation, including any consulting, advisory or other compensatory fee paid by the Company to the director; and (b) whether the director is affiliated with Moody’s Corporation, any of its subsidiaries or an affiliate of any subsidiary; each as determined in accordance with SEC regulations.
In assessing independence, the Board took into account that Mr. Anderson,Bermudez, Ms Esperdy, Mr. Bermudez, Dr. Duffie,Forlenza, Ms Hill, Mr. Kist,Howell, Ms Seidman and Mr. Van Saun each served during 2017,2021, or currently serves (and that Mr. Anderson and Dr. McKinnell each served, prior to their retirement from the Board), as directors, employees faculty members or trustees of entities that are rated or have issued securities rated by Moody’s Investors Service, as listed in the Company’s Director and Shareholder Affiliation Policy posted on the Company’s website under the headings “About Moody’s—Investor Relations—Investor Relations Home—Corporate Governance—Charter Documents—Other Governance Documents,” and that in 2021 the associated fees from each such entity accounted for less than 1% of annual revenues of the Company’s 2017 revenue. The Board also took into account that both Mr. ForlenzaCompany and Mr. Zalm each served during 2017 and currently serves as directors and employees of entities that are rated by Moody’s Investors Service.the other entities. In addition, the Board took into account that the Company from time to time engages in business with entities where one of our directors, director candidates or their immediate family members are employed. In 2017, payments that the Company made to such businesses accounted for less than 1% of the annual revenues of the Company and each of theemployed or have other entities.relationships. The Board found nothing in the relationships to be contrary to the standards for determining independence as contained in the NYSE’s requirements and the Company’s Corporate Governance Principles. A copy of these standards is found in Attachment A to the Company’s Corporate Governance Principles on the Company’s website atwww.moodys.com under the headings “About Moody’s—Investor Relations—Investor Relations Home—Corporate Governance—Charter Documents—Other Governance Documents.”
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BOARD AND COMMITTEE EVALUATION PROCESS
The Board’s RoleCompany’s Board and committee evaluation process is summarized below. The topics considered during the evaluation include Board effectiveness in the Oversightoverseeing key areas, such as strategy and risk, performance of Company Riskcommittees’ duties under their respective charters, Board and committee operations, and individual director performance.
1 | Review of Evaluation Process. The Governance & Nominating Committee annually reviews the evaluation process, including the evaluation method, to ensure that constructive feedback is solicited on the performance of the Board, its Committees, and individual directors. | |
2 | Questionnaire and One-on-One Interviews. The Board, the Audit Committee, the Compensation & Human Resources Committee and the Governance & Nominating Committee each conducts an annual self-evaluation through the use of a written questionnaire. All directors, other than the Chairman and the Lead Independent Director, also evaluate Chairman and Lead Independent Director performance through a written questionnaire. All questionnaires include open-ended questions to solicit direct feedback and the responses are collected on an unattributed basis. In addition, the Chairman and the Lead Independent Director conduct annual interviews with each non-management director to discuss individual Board member performance. | |
3 | Summary of Written Evaluations. Directors’ responses to the questionnaires are aggregated without attribution and shared with the full Board and the applicable committees. All responses, including written comments, are provided along with an overview of the high and low scores on various topics. | |
4 | Board and Committee Review. Using aggregated results as a reference, the Audit Committee and the Compensation & Human Resources Committee discuss their respective results. Discussions of the Board, Chairman, Lead Independent Director and Governance & Nominating Committee results occur at the Governance & Nominating Committee. Following the committee-level discussions, all evaluation results and feedback, including those from the one-on-one interviews and the Chairman and Lead Independent Director evaluation questionnaire, are discussed by the full Board. | |
5 | Actions. The Board decides on specific actions to incorporate feedback received, including making any appropriate changes to Board- and committee-related practices. |
THE BOARD’S ROLE IN THE OVERSIGHT OF COMPANY RISK
The Board of Directors oversees the Company’s enterprise-wide approach to the major risks facing the Company and, with the assistance of the Audit Committee and the Compensation & Human Resources Committee, oversees the Company’s policies for assessing and managing its exposure to risk. The Board periodically reviews these risks and the Company’s risk management processes, including in connection with its review of the Company’s strategy. The Board’s responsibilities include reviewing the Company’s practices with respect to risk assessment and risk management and reviewing contingent liabilities and risks that may be material to the Company. The Audit Committee
reviews the Company’s policies with respectcharters, frameworks and approach to enterprise-wide risk assessment and risk management, financial and compliance risks, including risks relating to internal controls and cyber risks, and major legislative and regulatory developments that could materially affect the Company. In addition, at least annually, theThe Audit Committee reviews the implementation and effectiveness of the Company’s enterprise risk management program with the Chief Risk Officer. In addition, the Board periodically reviews these risks and, with the assistance of the Audit Committee, the Company’s risk management processes, including in connection with its review of the Company’s strategy. The Audit Committee’s responsibilities include reviewing the Company’s practices with respect to risk assessment and risk management and the Board’s responsibility includes reviewing contingent liabilities and risks that may be material to the Company. The Compensation & Human Resources Committee oversees
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management’s assessment of whether the Company’s compensation structure, policies and programs create risks that are reasonably likely to have a material adverse effect on the Company and reviews the results of this assessment. The Governance & Nominating Committee oversees risks related to governance, including with respect to succession planning for the Board, and sustainability matters.
Under the oversight of the Board and its committees, the Chief Executive Officer has established an Enterprise-Wide Risk Committee, comprised of the Chief Executive Officer and his direct reports, which include the Chief Risk Officer. The EnterpriseEnterprise-Wide Risk Committee reviews the work of the Enterprise Risk Function that is managed by the Chief Risk Officer with the assistance of the Head of Corporate Planning and Treasury and the Head of the Internal Audit Function.Officer. The Chief Risk Officer chairs a subcommittee consisting of senior executives from each ofoversees risk officers for the Company’s majortwo business unitssegments, MIS and MA, and the support functions in Moody’s Shared Services, Inc. who periodically report on risks and their mitigations within their areas of responsibility. Among other things, the Enterprise Risk Function is responsible for identifying and monitoring existing and emerging risks that are important risks to the achievement of the Company’s strategic and operative objectives; formulatingreviewing appropriate polices, and monitoring and reporting frameworks to support effective management of important risks;risks as applicable; reviewing and evaluating the effectiveness of management processes and action plans to address such risks; advising on and recommending to executive management any significant actions or initiatives that they believe are necessary to effectively manage risk; and seeing that activities of discrete risk management disciplines within the Company are appropriately coordinated. The Chief Risk Officer presented the Enterprise Risk Committee’s analysis to the Board at two meetingsdirectors six times in 2017.2021. Additionally, the Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee reviewed risks within their areas of responsibility at separate meetings in 2017.
2021. Significant risk issues evaluated by and/or major changes proposed by the Enterprise-Wide Risk Committee and the Chief Risk Officer are discussed at various Board meetings throughout the year.
Board’s Role in Cybersecurity Oversight
The Board of Directors provides oversight of management’s efforts to identify and mitigate cybersecurity risks and respond to cyber threats. The enterprise-wide Cyber Enterprise Risk Management Committee, led by the Chief Information Security Officer (“CISO”), is responsible for validating that the Company has people, process and technology capabilities to identify, mitigate, and report on the Company’s cyber risk posture to the Company’s executive team and the Board. The Board is updated on a quarterly basis by the CISO and the Chief Information Officer, with escalations to the Board handled through management, as needed. In addition, the Audit Committee reviews the Company’s financial and compliance risks, including, but not limited to, risks relating to internal controls and cyber risks, and the Chairman of the Audit Committee holds a Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University.
Executive SessionsEXECUTIVE SESSIONS
The independent directors routinely meet in executive session at regularly scheduled Board meetings. Dr. McKinnell,Vincent A. Forlenza, the independent Chairman of the Board,Board’s Lead Independent Director, establishes the agenda for and presides at these sessions and has the authority to call additional sessions as appropriate.
Communications with DirectorsCOMMUNICATIONS WITH DIRECTORS
The Board of Directors has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may communicate with the Board of Directors or with allnon-management directors as a group, or with a specific director or
MOODY’S 2022 PROXY STATEMENT | 15 |
directors (including the Chairman of the Board), by writing to them c/o the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007.10007 or sending an email to corporatesecretary@moodys.com.
All communications received as set forth in the preceding paragraph will be opened byThe Board has instructed the Corporate Secretary into review correspondence directed to the officeBoard of Directors and, at the Company’s General CounselCorporate Secretary’s discretion, to forward items that she deems to be appropriate for the sole purpose of determining whether the contents represent a message to the Company’s directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee.Board’s consideration.
Succession PlanningSUCCESSION PLANNING
The Board and the Compensation & Human Resources Committee review succession planning annually in conjunction with the Board’s review of strategic planning. The Board conducted extensive discussions regarding the CEO transition as well as succession planning and development of the senior leadership group. In addition, in light of the COVID-19 pandemic, the Board also reviewed the Company’s business continuity plans, which included emergency succession plans for key executives.
Anti-Hedging and Anti-Pledging Policy; Short Sales and Other Speculative TradesANTI-HEDGING AND ANTI-PLEDGING POLICY; SHORT SALES AND OTHER SPECULATIVE TRADES
All executive officers, directors and directorstheir family members are subject to a securities trading policy under which they are prohibited from hedging and pledging Moody’s securities, including any publicly traded securities of a Moody’s subsidiary. The term “family member” is defined in the Company’s policy against insider trading and generally includes family members or entities that hold, purchase or sell Company stock that is attributed to the director or officer. Specifically, the following activities are prohibited under the policy:
Making “short sales” of Moody’s securities. A short sale has occurred if the seller: (i) does not own the securities sold; or (ii) does own the securities sold, but does not deliver or transmit them within the customary settlement period.
Engaging in short-term or speculative transactions or entering into any transaction (including purchasing or selling forward contracts, equity swaps, puts or calls) that areis designed to offset any decrease in the market value of or areis otherwise based on the price of Moody’s securities.
Holding Moody’s securities in margin accounts, buying Moody’s securities on margin or pledging Moody’s securities as collateral for a loan.
Employees who are not executive officers (and their family members) are prohibited from: (i) making short sales of Moody’s securities; (ii) buying Moody’s securities on margin or in any account in which a financial firm lends cash to purchase the securities; and (iii) engaging in short-term or speculative transactions involving Moody’s securities, including buying or selling put or call options and entering into other derivative transactions involving Moody’s securities. The restrictions in clause (iii) do not prohibit the exercise of Moody’s stock options that employees receive in connection with their compensation.
RuleRULE 10b5-110B5-1 Trading PlansTRADING PLANS
The CEO, CFOChief Executive Officer, Chief Financial Officer and certain other officers of the Company enter into Rule10b5-1 stock trading plans from time to time. These plans allow executives to adopt predetermined plansprocedures for trading shares of Company stock in advance of learning any materialnon-public information. The use of these trading plans permits diversification, retirement and tax planning activities. The transactions under the plans will beare disclosed publicly through Form 4 filings with the SEC.
16 | MOODY’S 2022 PROXY STATEMENT |
The Audit Committee represents and assists the Board of Directors in its oversight responsibilities relating to: the integrity of the Company’s financial statements and the financial information provided to the Company’s stockholders and others; the Company’s compliance with legal and regulatory requirements; the Company’s internal controls; the Company’s policies with respect to risk assessment and risk management, and the review of contingent liabilities and risks that might be material to the Company;Company; and the audit process, including the qualifications and independence of the Company’s principal external auditors (the “Independent Auditors”), and the performance of the Independent Auditors and the Company’s internal audit function.
Oversight of Audit Processes
As part of the Audit Committee’s oversight of the audit process, the Audit Committee and its Chairman are directly involved in the selection of the lead engagement partner when there is a rotation required under applicable rules, and the Audit Committee reviews and concurs in the appointment and compensation of the head of the Company’s internal audit function.function (the “Chief Audit Executive”). The Committee provides input regarding the annual evaluation of the Chief Audit Executive. The Committee also approves the fees and terms associated with the retention of the Independent Auditors to perform the annual engagement. In determining whether to approve services proposed to be provided by the Independent Auditors, the Committee is provided with summaries of the services, the fee associated with each service as well as information regarding incremental fees to be approved. The Committee also receives benchmarking data for audits of companies of similar sizes and audits of comparable complexity in order to determine the reasonableness of the proposed fees.
Responsibilities under the Audit Committee Charter
In fulfilling the responsibilities under its charter, there are a number of specific responsibilities that the Audit Committee performs:Committee:
Discusses with, and receives regular status reports from, the Independent Auditors and the head of the internal audit functionChief Audit Executive on the overall scope and plans for their audits, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. Also receives regular updates on the Company’s internal control over financial reporting, and discusses with management and the Independent Auditors their evaluations and conclusions with respect to internal control over financial reporting.
Meets with the Independent Auditors and the head of the internal audit function,Chief Audit Executive, with and without management present, to discuss the results of their respective audits, in addition to holding meetings with members of management, including the general counsel.General Counsel.
Reviews significant accounting policies, critical estimates and disclosures with management and the Independent Auditors, including the implementation of any new accounting standards or requirements.
Oversees financial, risk and other disclosures made in the Company’s annual and quarterly reports related to sustainability, and at least annually reviews reports by management regarding the adequacy and effectiveness of the Company’s internal controls and procedures related to such disclosures.
MOODY’S 2022 PROXY STATEMENT | 17 |
Oversees the implementation of new financial reporting systems and their related internal controls.
Reviews the Company’s financial and compliance risks, including, but not limited to, risks relating to internal controls and cyber risks.
Receives periodic reports on the effectiveness of the Company’s compliance program and regular status reports on compliance issues, including reports required by the Audit Committee’s policy for the receipt, retention and treatment of any complaints received by the Company regarding accounting, internal accounting control, auditing and federal securities law matters.
Reviews its charter annually and conducts an annual self-evaluation to assess its performance.
The Audit Committee also has the authority, at the Company’s expense, to engage its own outside advisors, including experts in particular areas of accounting, as it determines appropriate.
Ongoing Assessment of the Independent Auditors
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Independent Auditors and, as such, the Independent Auditors report directly to the Audit Committee. KPMG LLP has served as the Company’s independent auditorIndependent Auditors since 2008, and was selectedre-appointed at the conclusion of a competitive process that the Audit Committee conducted in 2019 to review the selection of the Company’s independent registered public accounting firm.Independent Auditors. In selecting the Independent Auditors, the Committee considered the relative costs, benefits, challenges, potential impact, and overall advisability of selecting different Independent Auditors. In addition, the Audit Committee conducts an annual performance assessment of the Independent Auditors, seeking performance feedback from all the members of the Committee as well as from officers with audit-related responsibilities. The factors the Audit Committee considered in conducting this assessment included: independence, objectivity and integrity; quality of services and the ability to meet performance delivery dates; responsiveness and ability to adapt; proactivity in identification of opportunities and risks; performance of the lead engagement partners as well as other team members; technical expertise; enhancement of the audit process using more digital tools; understanding of the Company’s business and industry; effectiveness of their communication; sufficiency of resources; fee levels in light of the services rendered; and management feedback.
Policy on Pre-Approval of Independent Auditors Fees
The Audit Committee has established a policy setting forth the requirements for thepre-approval of audit and permissiblenon-audit services to be provided by the independent registered public accounting firm.Independent Auditors. Under the policy, the Audit Committeepre-approves the annual audit engagement terms and fees, as well as any other audit services and specified categories ofnon-audit services, subject to certainpre-approved fee levels. Any fee overruns in excess of the established thresholds are presented to the Audit Committee for approval. In addition, pursuant to the policy, the Audit Committee authorized its Chairman topre-approve other audit and permissiblenon-audit services in 20172021 up to $100,000$250,000 per engagement and a maximum of $300,000$500,000 per year. The policy requires that the Audit Committee Chairman report anypre-approval decisions to the full Audit Committee at its next scheduled meeting. For the year ended December 31, 2017,2021, the Audit Committee or theits Chairmanpre-approved all of the services provided by the Company’s independent registered public accounting firm,Independent Auditors, which are described on page 25.35. The Audit Committee also is responsible for overseeing the audit fee negotiation associated with the retention of KPMG LLPthe Independent Auditors to perform the annual audit engagement.
18 | MOODY’S 2022 PROXY STATEMENT |
Notable Actions in 2021
During 2021, the Audit Committee continued to review and oversee the expansion of voluntary sustainability disclosures in the Company’s periodic filings with the SEC and certain other external reports that reflect recommendations from sustainability assessment organizations. Such disclosure included details regarding the Company’s human capital management provided in the Company’s Form 10-K for the year ended December 31, 2020.
The members of the Audit Committee are Ms Seidman (Chairman), Mr. Anderson,Bermudez, Ms Esperdy, Mr. Bermudez, Dr. Duffie,Forlenza, Ms Hill, Mr. Kist, Dr. McKinnellHowell, Mr. Serafin and Mr. Van Saun, each of whom is independent under NYSE and SEC rules and under the Company’s Corporate Governance Principles. The Board of Directors has determined that each of Mr. Anderson,Ms Seidman, Mr. Bermudez, Ms Esperdy, Mr. Kist, Dr. McKinnell, Ms SeidmanForlenza, Mr. Howell and Mr. Van Saun is an “audit committee financial expert” under the SEC’s rules. Should Messrs. Forlenza and Zalm be elected, the Board intends to appoint them to the Audit Committee. The Board has determined that they both qualify as “audit committee financial experts.” The Audit Committee held seventen meetings during 2017.2021.
The Audit Committee has reviewed and discussed with management and the independent auditorsIndependent Auditors the audited financial statements of the Company for the year ended December 31, 20172021 (the “Audited Financial Statements”), management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and the independent auditors’Independent Auditors’ evaluation of the Company’s system of internal control over financial reporting. In addition, the Audit Committee has discussed with KPMG LLP, which reports directly to the Audit Committee, the matters that independent registered public accounting firms must communicate to audit committees under applicable Public Company Accounting Oversight Board (“PCAOB”) and SEC standards.
The Audit Committee also has discussed with KPMG LLP its independence from the Company, including the matters contained in the written disclosures and letter required by applicable requirements of the PCAOB regarding independent registered public accounting firms’ communications with audit committees about independence. The Audit Committee also has discussed with management of the Company and KPMG LLP such other matters and received such assurances from them as it deemed appropriate. The Audit Committee also considers whether the rendering ofnon-audit services by KPMG LLP to the Company is compatible with maintaining the independence of KPMG LLP from the Company. The Company historically has used KPMG LLP for only a limited number ofnon-audit services each year.
Following the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the Audited Financial Statements be included in the Company’s Annual Report on Form10-K for the year ended December 31, 20172021 for filing with the SEC.
The Audit Committee
Leslie F. Seidman,Chairman
Basil L. Anderson
Jorge A. Bermudez
Darrell Duffie
Kathryn M. Hill
Ewald Kist
Henry A. McKinnell, Jr.
Bruce Van Saun
THE GOVERNANCE & NOMINATING COMMITTEEChairman and Chief Executive Officer,
The roleCitizens Financial Group, Inc.
✓ Independent C: Chairman M: Member
4 | MOODY’S 2022 PROXY STATEMENT |
Moody’s manages its business with the goal of delivering value to all of its stakeholders, including its customers, employees, business partners, local communities and stockholders. Moody’s advances its commitment to sustainability by considering environmental, social, and governance (“ESG”) factors throughout its operations and products and services. It uses its expertise and assets to make a positive difference through technology tools, research and analytical services that help other organizations and the investor community better understand the links between sustainability considerations and the global markets. Moody’s efforts to help market participants evaluate risk by integrating ESG considerations into capital allocations and long-term planning include the following:
• | formed Moody’s ESG Solutions to align its product and service offerings to meet the growing global demand for ESG capabilities |
• | acquired RMS, a leading global provider of climate and natural disaster risk modeling and analytics |
Moody’s efforts to promote sustainability-related thought leadership, assessments and data to market participants include following the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate and assess performance, including the Global Reporting Initiative (“GRI”) and the Sustainability Accounting Standards Board (“SASB”). The Company also issues an annual report on how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. Moody’s sustainability-related achievements in 2021 included the following:
• | recognized as a 2021 Global Compact LEAD company for its ongoing commitment to the United Nations Global Compact and its Ten Principles for responsible business |
• | recognized with CDP’s ‘A’ Score on Climate Action for the second consecutive year, making Moody’s one of a small number of high-performing companies out of nearly 12,000 that are leading actions to cut emissions, mitigate climate risks and develop the low-carbon economy |
• | released its inaugural Stakeholder Sustainability Report, which details Moody’s focus on sustainability and its progress toward incorporating ESG considerations across its products and corporate operations |
• | joined the Taskforce on Nature-related Financial Disclosures (“TNFD”) to help develop a reporting framework and act on evolving nature-related risks |
2020 Decarbonization Plan—Advisory Say-on-Climate Resolution
Last year, the Board determined to submit the Company’s 2020 Decarbonization Plan (the “2020 Plan”) to a vote of stockholders following the Company’s discussions with TCI Fund Management Limited on behalf of the stockholder The Children’s Investment Master Fund. The 2020 Plan outlines our current science-based targets and strategies for realizing the Company’s climate ambitions, including the procurement of 100% of renewable electricity for the Company’s office spaces and optimizing efficiencies in its operations through a “Workplace of the Future”. The 2020 Plan received the support of 93% of the shares voted, which underscored that climate considerations and action are now an integral part of the Company’s business strategy, governance, and corporate performance.
MOODY’S 2022 PROXY STATEMENT | 5 |
As part of last year’s proposal, we also announced our intention to annually report on Moody’s assessment of our greenhouse gas (“GHG”) levels, our plan for reducing our GHG emissions, and our progress against that plan. The Company has implemented a number of initiatives to execute on the 2020 Plan, including the following:
Committing to achieve net-zero emissions across its operations and value chain by 2040, bringing its original target forward by 10 years;
Contracting towards meeting the Company’s 100% renewable electricity commitment for 2021;
Promoting energy efficiency through office programs aimed at energy conservation;
Expanding the Company’s engagement with suppliers relating to decarbonization from approximately 300 in 2020 to approximately 500 in 2021;
Procuring carbon offsets to match the remainder of our emissions from Scope 1, Scope 2, business travel and employee commuting;
Continuing to actively engage with stakeholders on climate-related issues; and
Updating the Company’s environmental sustainability, privacy and supplier policies to reflect the heightened expectations for both the Company and its partners.
Additional details on the Company’s progress will be disclosed as part of its 2021 TCFD report and 2022 CDP response.
Board Oversight of Sustainability Matters
The Board oversees sustainability matters, with assistance from the Audit, Governance & Nominating and Compensation & Human Resources Committees, as part of its oversight of management and the Company’s overall strategy. The Board also oversees Moody’s policies for assessing and managing the Company’s exposure to risk, including climate-related risks such as business continuity disruption and reputational or credibility concerns stemming from incorporation of climate-related risks into the credit methodologies and credit ratings of Moody’s Investors Service, Inc. (“Moody’s Investors Service” or “MIS”).
Audit Committee. Oversees financial, risk, accounting and other disclosures made in the Company’s annual and quarterly reports related to sustainability. Governance & Nominating Compensation & Human Resources Committee. Oversees inclusion of | ||||
Expanded voluntary sustainability disclosure in its Form 10-K and Development of a robust ESG strategy for the Company More fully integrated sustainability-related performance metrics into the Strategic & Operational compensation metric of all senior executives | ||||
6 | MOODY’S 2022 PROXY STATEMENT |
DIVERSITY, EQUITY AND INCLUSION
The Board also oversees diversity, equity and inclusion (“DE&I”) matters, with assistance from the Compensation & Human Resources Committee. Management periodically presents to the directors on relevant topics, including diversity talent and DE&I matters more generally. In 2021, the Board oversaw the Company’s expanded public disclosure regarding DE&I matters in addition to the human capital management disclosure in the Company’s Annual Report and this Proxy Statement, as well as the public disclosure of its 2020 EEO-1 Report. The Company’s DE&I efforts aim to drive positive impact across our workforce, workplace, customers and communities. Recent Moody’s DE&I efforts included the following:
• | Established and enhanced employee programs, including launching a high potential initiative for women and diverse leaders and transforming the Senior Women Leadership Development Program |
• | became one of the |
• | Committed $1 million over five years to promote equal justice and |
• | Launched Moody’s Multicultural Customer Initiative, which seeks to bring financial opportunities and |
The Board also oversees human capital matters, with assistance from the Compensation & Human Resources Committee. As a global integrated risk assessment firm, attracting, supporting and retaining skilled talent is essential to the Company’s success. Moody’s addresses these goals by: (i) promoting DE&I among employees; (ii) seeking to provide market-competitive compensation and benefits and rewarding employees for their contributions to the Company’s strategic and operational goals; (iii) offering wellness programs; (iv) supporting employee learning, development and skills enhancement; and (v) advancing employee engagement.
MOODY’S 2022 PROXY STATEMENT | 7 |
| DE&I | The Company’s key objectives include: (i) incorporating DE&I into Moody’s business strategy; (ii) establishing leadership accountability with respect to diversity including through executive compensation programs; (iii) working to increase diverse representation, e.g., women and
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Moody’s compensation programs are designed to foster and maintain a strong, capable, experienced and motivated global workforce. An important element of the | Compensation | |||||||||||||||||
Benefits and Wellness Programs | Moody’s is committed to providing competitive benefits programs designed to care for all employees and their families. The Company’s comprehensive programs offer resources for physical and mental health that promote preventive care and awareness and support a healthy lifestyle. The Company also promotes financial wellness and provides for flexible work arrangements. Beyond delivering health, welfare, retirement benefits, and paid vacation and sick days, the Company extends other benefits to supports its employees and their families. | |||||||||||||||||
The Company views learning and education as an investment in its people that aligns their professional goals and interests with the success of the firm, and helps to retain talent over the longer-term. A number of training programs are available, including leadership development, professional skills development, technical skills, as well as compliance training. | Learning & Development | |||||||||||||||||
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8 | MOODY’S 2022 PROXY STATEMENT |
In order to address evolving best practices and new regulatory requirements, the Board of Directors reviews its corporate governance practices and the charters for its standing committees at least annually. After performing its annual governance review for 2021, the Board determined to amend the Company’s Audit Committee charter. The Board also determined that no amendments were needed to the Company’s Corporate Governance Principles and its charters for the Governance & Nominating, Compensation & Human Resources and Executive Committees. A copy of the Corporate Governance Principles is available on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.” Copies of the charters of the Audit Committee, the Governance & Nominating Committee, the Compensation & Human Resources Committee and the Executive Committee are available on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents.” Print copies of the Corporate Governance Principles and the committee charters may also be obtained upon request, addressed to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. The Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee assist the Board in fulfilling its responsibilities, as described below. The Executive Committee has the authority to exercise the powers of the Board when it is not in session (subject to applicable law, rules and regulations, and the Company’s Certificate of Incorporation and By-Laws), advises management and performs other duties delegated to it by the Board from time to time.
During 2021, the Board of Directors met 14 times. The Board had four standing committees: an Audit Committee, a Governance & Nominating Committee, a Compensation & Human Resources Committee and an Executive Committee. All incumbent directors attended more than 85% of the total number of meetings of the Board and of all Board committees on which they served in 2021.
Please refer to page 17 for additional information regarding the Audit Committee, page 20 for additional information regarding the Governance & Nominating Committee and page 20 for additional information regarding the Compensation & Human Resources Committee. The Executive Committee did not meet in 2021. Directors are encouraged to attend the Annual Meeting. All individuals elected to the Board at the Company’s 2021 annual meeting of stockholders attended the meeting.
RECOMMENDATION OF DIRECTOR CANDIDATES
The Governance & Nominating Committee considers and makes recommendations to the Board regarding the size, structure, composition and functioning of the Board and engages in succession planning for the Board and key leadership roles on the Board and its committees. The Governance & Nominating Committee is also responsible for overseeing processes for the selection and nomination of director candidates. The Governance & Nominating Committee periodically reviews the skills, experience, characteristics and other criteria for identifying and evaluating directors, and recommends these criteria to the Board. The Governance & Nominating Committee will consider director candidates recommended by stockholders of the Company and may also engage independent search firms from time to time to assist in identifying and evaluating potential director candidates. In considering a candidate for Board membership, whether proposed by stockholders or otherwise, the Governance & Nominating Committee examines the candidate’s business experience, qualifications, attributes and skills relevant to the management and oversight of the Company’s business, independence, the ability to represent diverse stockholder interests, judgment, integrity, the ability to commit sufficient time and attention to Board activities, and the absence of any potential conflicts with the Company’s business
MOODY’S 2022 PROXY STATEMENT | 9 |
and interests. The Committee also seeks diverse occupational and personal backgrounds for the Board. See “Qualifications and Skills of Directors” on page 27 and “Director Nominees” beginning on page 28 for additional information on the Company’s directors. To have a candidate considered by the Governance & Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information:
The name of the stockholder and evidence of the stockholder’s ownership of Company stock, including the number of shares owned and the length of time of ownership; and
The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company, and the candidate’s consent to be named as a director if selected by the Governance & Nominating Committee and nominated by the Board.
The stockholder recommendation and information described above must be sent to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or emailed to corporatesecretary@moodys.com, and must be received by the Corporate Secretary not later than 120 days prior to the first anniversary of the date the definitive proxy statement was first released to stockholders in connection with the preceding year’s annual meeting of stockholders. For the Company’s 2023 annual meeting of stockholders, this deadline is November 16, 2022.
The Governance & Nominating Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons who meet the criteria described above and might be available to serve on the Board. As described above, the Committee will also consider candidates recommended by stockholders on the same basis as those from other sources. The Governance & Nominating Committee, from time to time, also engages third party search firms that specialize in identifying director candidates for the Committee’s consideration.
Once a person has been identified by or for the Governance & Nominating Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Governance & Nominating Committee determines that the candidate warrants further consideration, the chairman or another member of the Committee contacts the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Governance & Nominating Committee requests information from the candidate, reviews the candidate’s accomplishments and qualifications, including in light of any other candidates whom the Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments.
The Company provides all new directors with an initial orientation session, which includes a comprehensive overview of the Company and the opportunity to meet with key leaders of the organization such as the Chief Executive Officer, Chief Financial Officer, General Counsel, the Presidents of MIS and Moody’s Analytics, Inc. (“Moody’s Analytics” or “MA”), the Chief Strategy Officer, the Chief Audit Executive, the Chief Information Officer and the Controller. This orientation includes, among other topics, an overview of the Company’s business, including MIS and MA, corporate governance, compliance program, strategy, technology and cybersecurity, enterprise risk management, and legal and regulatory matters.
Board and committee meetings, industry and corporate governance update presentations, periodic reports from the Company’s businesses and external training programs also provide the
10 | MOODY’S 2022 PROXY STATEMENT |
Company’s directors with continuing education throughout their tenure. In 2021, outside counsel presented to the Board regarding board oversight considerations with respect to ESG trends and developments. The Company reimburses directors for expenses associated with attendance at external education programs.
The Board periodically reviews its leadership structure to evaluate whether the structure remains appropriate and make a determination regarding whether or not to separate the roles of Chairman and Chief Executive Officer based upon the circumstances. The Company’s Corporate Governance Principles permit the roles of Chairman and Chief Executive Officer to be filled by a single person or different individuals. This flexibility allows the Board to review the structure of the Board periodically and determine whether to separate the two roles based upon the Company’s needs and circumstances from time to time.
In 2021, in connection with the retirement of Mr. McDaniel as President and Chief Executive Officer of the Company, the Board elected Mr. McDaniel to serve as Chairman of the Board. In addition, in light of the Board’s continued belief that strong, independent Board leadership is a critical aspect of effective corporate governance, the Board amended the Corporate Governance Principles to provide that, whenever and for so long as the Chairman is not an independent director, the independent directors will appoint an independent director to serve as the Lead Independent Director. In 2021, the independent directors appointed Mr. Forlenza to serve as Lead Independent Director for a term expiring at the Annual Meeting.
The role of Lead Independent Director is designed to support the Company’s strong, independent Board leadership and enhance candor and communication between the independent members of the Board, thenon-executive Chairman, and the Company’s Chief Executive Officer. In support of this goal, the Lead Independent Director has a robust set of responsibilities, including:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Setting the agenda for executive sessions;
Reviewing and approving the agenda, materials, and schedule for Board meetings, as well as other information sent to the Board;
Serving as principal liaison among the independent directors and on Board-wide issues between the independent directors and the Chairman or Chief Executive Officer; and
Being available for consultation and communication with major stockholders, as appropriate.
In addition to Mr. Forlenza’s role as Lead Independent Director, he also serves as Chairman of the Governance & Nominating Committee.
CODES OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a code of ethics that applies to its Chief Executive Officer, Chief Financial Officer and Controller, or persons performing similar functions. The Company has also adopted a code of business conduct and ethics that applies to the Company’s directors, officers and employees. A current copy of each of these codes is available on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.” A copy of each is also available in print to stockholders upon request, addressed to the Corporate Secretary of the Company at 7 World Trade
MOODY’S 2022 PROXY STATEMENT | 11 |
Center at 250 Greenwich Street, New York, New York 10007. The Company intends to satisfy disclosure requirements regarding any amendments to, or waivers from, the codes of ethics by posting such information on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.”
To assist it in making determinations of a director’s independence, the Board has adopted independence standards that are set forth below and are included in the Company’s Corporate Governance Principles. The Board has determined that Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Ms Hill, Mr. Howell, Ms Seidman, Mr. Serafin and Mr. Van Saun and thus a majority of the directors on the Board, are independent under these standards. In addition, the Board had previously determined that Mr. Anderson and Dr. McKinnell, who retired from the Board effective April 20, 2021, the date of Moody’s 2021 annual meeting, were independent under these standards. The standards adopted by the Board incorporate the director independence criteria included in the New York Stock Exchange (the “NYSE”) listing standards, as well as additional criteria established by the Board. The Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee are composed entirely of independent directors. In accordance with NYSE requirements and the independence standards adopted by the Board, all members of the Audit Committee and the Compensation & Human Resources Committee meet additional heightened independence standards applicable to audit committee and compensation committee members.
An “independent” director is a director whom the Board has determined has no material relationship with the Company or any of its consolidated subsidiaries (for purposes of this section, collectively referred to as the “Company”), either directly, or as a partner, stockholder or officer of an organization that has a relationship with the Company. For purposes of this definition, the Board has determined that a director is not independent if:
1. | the director is, or in the past three years has been, an employee of the Company, or an immediate family member of the director is, or in the past three years has been, an executive officer of the Company; |
2. | (a) the director, or an immediate family member of the director, is a current partner of the Company’s outside auditor; (b) the director is a current employee of the Company’s outside auditor; (c) a member of the director’s immediate family is a current employee of the Company’s outside auditor and personally works on the Company’s audit; or (d) the director or an immediate family member of the director was in the past three years a partner or employee of the Company’s outside auditor and personally worked on the Company’s audit within that time; |
3. | the director, or a member of the director’s immediate family, is or in the past three years has been, an executive officer of another company where any of the Company’s present executive officers serves or served on the compensation committee at the same time; |
4. | the director, or a member of the director’s immediate family, has received, during any 12-month period in the past three years, any direct compensation from the Company in excess of $120,000, other than compensation for Board service, compensation received by the director’s immediate family member for service as an employee (other than an executive officer) of the Company, and pension or other forms of deferred compensation for prior service with the Company; |
5. | the director is a current executive officer or employee, or a member of the director’s immediate family is a current executive officer of another company that makes payments to |
12 | MOODY’S 2022 PROXY STATEMENT |
or receives payments from the Company, or during any of the last three fiscal years, has made payments to or received payments from the Company, for property or services in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues; or |
6. | the director, or the director’s spouse, is an executive officer of a non-profit organization to which the Company or the Company foundation makes, or in the past three years has made, contributions that, in any single fiscal year, exceeded the greater of $1 million or 2% of the non-profit organization’s consolidated gross revenues. (Amounts that the Company foundation contributes under matching gifts programs are not included in the contributions calculated for purposes of this standard.) |
An “immediate family” member includes a director’s spouse, parents, children, siblings, mother- and father-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than a domestic employee) who shares the director’s home.
In addition, a director is not considered independent for purposes of serving on the Audit Committee, and may not serve on the Audit Committee, if the director: (a) accepts, directly or indirectly, from Moody’s Corporation or any of its subsidiaries, any consulting, advisory, or other compensatory fee, other than Board and committee fees and fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with Moody’s Corporation; or (b) is an “affiliated person” of Moody’s Corporation or any of its subsidiaries; each as determined in accordance with U.S. Securities and Exchange Commission (“SEC”) regulations.
Furthermore, in determining whether a director is considered independent for purposes of serving on the Compensation & Human Resources Committee, the Board must consider all factors specifically relevant to determining whether the director has a relationship with the Company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (a) the source of the director’s compensation, including any consulting, advisory or other compensatory fee paid by the Company to the director; and (b) whether the director is affiliated with Moody’s Corporation, any of its subsidiaries or an affiliate of any subsidiary; each as determined in accordance with SEC regulations.
In assessing independence, the Board took into account that Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Ms Hill, Mr. Howell, Ms Seidman and Mr. Van Saun each served during 2021, or currently serves (and that Mr. Anderson and Dr. McKinnell each served, prior to their retirement from the Board), as directors, employees or trustees of entities that are rated or have issued securities rated by Moody’s Investors Service, as listed in the Company’s Director and Shareholder Affiliation Policy posted on the Company’s website under the headings “About Moody’s—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents,” and that in 2021 the associated fees from each such entity accounted for less than 1% of annual revenues of the Company and each of the other entities. In addition, the Board took into account that the Company from time to time engages in business with entities where one of our directors, director candidates or their immediate family members are employed or have other relationships. The Board found nothing in the relationships to be contrary to the standards for determining independence as contained in the NYSE’s requirements and the Company’s Corporate Governance Principles. A copy of these standards is found in Attachment A to the Company’s Corporate Governance Principles on the Company’s website at www.moodys.com under the headings “About Moody’s—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.”
MOODY’S 2022 PROXY STATEMENT | 13 |
BOARD AND COMMITTEE EVALUATION PROCESS
The Company’s Board and committee evaluation process is summarized below. The topics considered during the evaluation include Board effectiveness in overseeing key areas, such as strategy and risk, performance of committees’ duties under their respective charters, Board and committee operations, and individual director performance.
THE BOARD’S ROLE IN THE OVERSIGHT OF COMPANY RISK
The Board of Directors oversees the Company’s enterprise-wide approach to the major risks facing the Company and, with the assistance of the Audit Committee and the Compensation & Human Resources Committee, oversees the Company’s policies for assessing and managing its exposure to risk. The Audit Committee reviews the Company’s charters, frameworks and approach to enterprise-wide risk assessment and risk management, financial and compliance risks, including risks relating to internal controls and cyber risks, and major legislative and regulatory developments that could materially affect the Company. The Audit Committee reviews the implementation and effectiveness of the Company’s enterprise risk management program with the Chief Risk Officer. In addition, the Board periodically reviews these risks and, with the assistance of the Audit Committee, the Company’s risk management processes, including in connection with its review of the Company’s strategy. The Audit Committee’s responsibilities include reviewing the Company’s practices with respect to risk assessment and risk management and the Board’s responsibility includes reviewing contingent liabilities and risks that may be material to the Company. The Compensation & Human Resources Committee oversees
Director since October 1997
Henry A. McKinnell, Jr., age 75, is Chairman of the Board of Directors and Chairman of the Executive Committee and serves as a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. Dr. McKinnell served as the Chief Executive Officer of Optimer Pharmaceuticals, Inc. from February 2013 until October 31, 2013. He served as Chairman of the Board of Pfizer Inc., a pharmaceutical company, from May 2001 until his retirement in December 2006 and Chief Executive Officer from January 2001 to July 2006. He served as President of Pfizer Inc. from May 1999 to May 2001, and as President of Pfizer Pharmaceuticals Group from January 1997 to April 2001. Dr. McKinnell served as Chief Operating Officer of Pfizer Inc. from May 1999 to December 2000 and as Executive Vice President from 1992 to 1999. He served as the Chairman of the Accordia Global Health Foundation, is Chairman Emeritus of the Connecticut Science Center and is Life Director of the Japan Society. He currently serves as a director of ViewRay, Inc., Federal Street Acquisition Corp. and ChemoCentryx, Inc. He served as Chairman of Optimer Pharmaceuticals, Inc. until 2013 and Emmaus Life Sciences until 2015. He served as a director of Angiotech Pharmaceuticals, Inc. until 2011, Pfizer Inc. and ExxonMobil Corporation until 2007 and John Wiley & Sons until 2005.
Leslie F. Seidman
Director since December 2013
Leslie F. Seidman, age 55, is Chairman of the Audit Committee and is a member of the Executive, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. Ms Seidman has over 30 years of experience in the accounting profession, serving as a member of the Financial Accounting Standards Board (FASB) from 2003-2013, and as Chairman for approximately the last three years of her term. During her tenure, the FASB established numerous accounting standards relating to financial instruments, including securitizations, derivatives and credit losses and worked with regulators and policy makers in the U.S., and in other major capital markets to develop consistent accounting standards. Previously, Ms Seidman was the founder and managing member of a financial reporting consulting firm that served global financial institutions, law firms and accounting firms. From 1987 to 1996, Ms Seidman served as Vice President, Accounting Policy and in other roles at J.P. Morgan & Company, Inc. (now JPMorgan Chase & Co.) and from 1984 to 1987, Ms Seidman served as an auditor for Arthur Young & Co. (now Ernst & Young, LLP). She is currently a Public Governor for the FINRA, where she chairs the Audit Committee and serves on the Regulatory Policy and Nominations and Governance Committees. She is also an advisor to Idaciti, Inc., a
14 | MOODY’S |
management’s assessment of whether the Company’s compensation structure, policies and programs create risks that are reasonably likely to have a material adverse effect on the Company and reviews the results of this assessment. The Governance & Nominating Committee oversees risks related to governance, including with respect to succession planning for the Board, and sustainability matters.
Under the oversight of the Board and its committees, the Chief Executive Officer has established an Enterprise-Wide Risk Committee, comprised of the Chief Executive Officer and his direct reports, which include the Chief Risk Officer. The Enterprise-Wide Risk Committee reviews the work of the Enterprise Risk Function that is managed by the Chief Risk Officer. The Chief Risk Officer oversees risk officers for the Company’s two business segments, MIS and MA, and the support functions in Moody’s Shared Services, Inc. who periodically report on risks and their mitigations within their areas of responsibility. Among other things, the Enterprise Risk Function is responsible for identifying and monitoring existing and emerging risks that are important to the achievement of the Company’s strategic and operative objectives; reviewing appropriate polices, monitoring and reporting frameworks to support effective management of important risks as applicable; reviewing and evaluating the effectiveness of management processes and action plans to address such risks; advising on and recommending to executive management any significant actions or initiatives that they believe are necessary to effectively manage risk; and seeing that activities of discrete risk management disciplines within the Company are appropriately coordinated. The Chief Risk Officer presented the Enterprise Risk Committee’s analysis to the directors six times in 2021. Additionally, the Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee reviewed risks within their areas of responsibility at separate meetings in 2021. Significant risk issues evaluated by and/or major changes proposed by the Enterprise-Wide Risk Committee and the Chief Risk Officer are discussed at various Board meetings throughout the year.
Board’s Role in Cybersecurity Oversight
The Board of Directors provides oversight of management’s efforts to identify and mitigate cybersecurity risks and respond to cyber threats. The enterprise-wide Cyber Enterprise Risk Management Committee, led by the Chief Information Security Officer (“CISO”), is responsible for validating that the Company has people, process and technology capabilities to identify, mitigate, and report on the Company’s cyber risk posture to the Company’s executive team and the Board. The Board is updated on a quarterly basis by the CISO and the Chief Information Officer, with escalations to the Board handled through management, as needed. In addition, the Audit Committee reviews the Company’s financial and compliance risks, including, but not limited to, risks relating to internal controls and cyber risks, and the Chairman of the Audit Committee holds a Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University.
The independent directors routinely meet in executive session at regularly scheduled Board meetings. Vincent A. Forlenza, the Board’s Lead Independent Director, establishes the agenda for and presides at these sessions and has the authority to call additional sessions as appropriate.
The Board of Directors has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may communicate with the Board of Directors or with all non-management directors as a group, or with a specific director or
MOODY’S 2022 PROXY STATEMENT | 15 |
directors (including the Chairman of the Board), by writing to them c/o the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or sending an email to corporatesecretary@moodys.com.
The Board has instructed the Corporate Secretary to review correspondence directed to the Board of Directors and, at the Corporate Secretary’s discretion, to forward items that she deems to be appropriate for the Board’s consideration.
The Board and the Compensation & Human Resources Committee review succession planning annually in conjunction with the Board’s review of strategic planning. The Board conducted extensive discussions regarding the CEO transition as well as succession planning and development of the senior leadership group. In addition, in light of the COVID-19 pandemic, the Board also reviewed the Company’s business continuity plans, which included emergency succession plans for key executives.
ANTI-HEDGING AND ANTI-PLEDGING POLICY; SHORT SALES AND OTHER SPECULATIVE TRADES
All executive officers, directors and their family members are subject to a securities trading policy under which they are prohibited from hedging and pledging Moody’s securities, including any publicly traded securities of a Moody’s subsidiary. The term “family member” is defined in the Company’s policy against insider trading and generally includes family members or entities that hold, purchase or sell Company stock that is attributed to the director or officer. Specifically, the following activities are prohibited under the policy:
Making “short sales” of Moody’s securities. A short sale has occurred if the seller: (i) does not own the securities sold; or (ii) does own the securities sold, but does not deliver or transmit them within the customary settlement period.
Engaging in short-term or speculative transactions or entering into any transaction (including purchasing or selling forward contracts, equity swaps, puts or calls) that is designed to offset any decrease in the market value of or is otherwise based on the price of Moody’s securities.
Holding Moody’s securities in margin accounts, buying Moody’s securities on margin or pledging Moody’s securities as collateral for a loan.
Employees who are not executive officers (and their family members) are prohibited from: (i) making short sales of Moody’s securities; (ii) buying Moody’s securities on margin or in any account in which a financial firm lends cash to purchase the securities; and (iii) engaging in short-term or speculative transactions involving Moody’s securities, including buying or selling put or call options and entering into other derivative transactions involving Moody’s securities. The restrictions in clause (iii) do not prohibit the exercise of Moody’s stock options that employees receive in connection with their compensation.
The Chief Executive Officer, Chief Financial Officer and certain other officers of the Company enter into Rule 10b5-1 stock trading plans from time to time. These plans allow executives to adopt predetermined procedures for trading shares of Company stock in advance of learning any material non-public information. The use of these trading plans permits diversification, retirement and tax planning activities. The transactions under the plans are disclosed publicly through Form 4 filings with the SEC.
16 | MOODY’S 2022 PROXY STATEMENT |
The Audit Committee represents and assists the Board of Directors in its oversight responsibilities relating to: the integrity of the Company’s financial statements and the financial information provided to the Company’s stockholders and others; the Company’s compliance with legal and regulatory requirements; the Company’s internal controls; the Company’s policies with respect to risk assessment and risk management, and the review of contingent liabilities and risks that might be material to the Company; and the audit process, including the qualifications and independence of the Company’s principal external auditors (the “Independent Auditors”), and the performance of the Independent Auditors and the Company’s internal audit function.
Oversight of Audit Processes
As part of the Audit Committee’s oversight of the audit process, the Audit Committee and its Chairman are directly involved in the selection of the lead engagement partner when there is a rotation required under applicable rules, and the Audit Committee reviews and concurs in the appointment and compensation of the head of the Company’s internal audit function (the “Chief Audit Executive”). The Committee provides input regarding the annual evaluation of the Chief Audit Executive. The Committee also approves the fees and terms associated with the retention of the Independent Auditors to perform the annual engagement. In determining whether to approve services proposed to be provided by the Independent Auditors, the Committee is provided with summaries of the services, the fee associated with each service as well as information regarding incremental fees to be approved. The Committee also receives benchmarking data for audits of companies of similar sizes and audits of comparable complexity in order to determine the reasonableness of the proposed fees.
Responsibilities under the Audit Committee Charter
In fulfilling the responsibilities under its charter, the Audit Committee:
Discusses with, and receives regular status reports from, the Independent Auditors and the Chief Audit Executive on the overall scope and plans for their audits, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. Also receives regular updates on the Company’s internal control over financial reporting, and discusses with management and the Independent Auditors their evaluations and conclusions with respect to internal control over financial reporting.
Meets with the Independent Auditors and the Chief Audit Executive, with and without management present, to discuss the results of their respective audits, in addition to holding meetings with members of management, including the General Counsel.
Reviews significant accounting policies, critical estimates and disclosures with management and the Independent Auditors, including the implementation of any new accounting standards or requirements.
Reviews and discusses with management and the Independent Auditors the Company’s earnings press releases and periodic filings made with the SEC, including the use of information that is provided to enhance understanding of the results presented in accordance with GAAP.
Oversees financial, risk and other disclosures made in the Company’s annual and quarterly reports related to sustainability, and at least annually reviews reports by management regarding the adequacy and effectiveness of the Company’s internal controls and procedures related to such disclosures.
MOODY’S 2022 PROXY STATEMENT | 17 |
Oversees the implementation of new financial reporting systems and their related internal controls.
Reviews the Company’s financial and compliance risks, including, but not limited to, risks relating to internal controls and cyber risks.
Receives periodic reports on the effectiveness of the Company’s compliance program and regular status reports on compliance issues, including reports required by the Audit Committee’s policy for the receipt, retention and treatment of any complaints received by the Company regarding accounting, internal accounting control, auditing and federal securities law matters.
Reviews its charter annually and conducts an annual self-evaluation to assess its performance.
The Audit Committee also has the authority, at the Company’s expense, to engage its own outside advisors, including experts in particular areas of accounting, as it determines appropriate.
Ongoing Assessment of the Independent Auditors
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Independent Auditors and, as such, the Independent Auditors report directly to the Audit Committee. KPMG LLP has served as the Company’s Independent Auditors since 2008, and was re-appointed at the conclusion of a competitive process that the Audit Committee conducted in 2019 to review the selection of the Company’s Independent Auditors. In selecting the Independent Auditors, the Committee considered the relative costs, benefits, challenges, potential impact, and overall advisability of selecting different Independent Auditors. In addition, the Audit Committee conducts an annual performance assessment of the Independent Auditors, seeking performance feedback from all the members of the Committee as well as from officers with audit-related responsibilities. The factors the Audit Committee considered in conducting this assessment included: independence, objectivity and integrity; quality of services and the ability to meet performance delivery dates; responsiveness and ability to adapt; proactivity in identification of opportunities and risks; performance of the lead engagement partners as well as other team members; technical expertise; enhancement of the audit process using more digital tools; understanding of the Company’s business and industry; effectiveness of their communication; sufficiency of resources; fee levels in light of the services rendered; and management feedback.
Policy on Pre-Approval of Independent Auditors Fees
The Audit Committee has established a policy setting forth the requirements for the pre-approval of audit and permissible non-audit services to be provided by the Independent Auditors. Under the policy, the Audit Committee pre-approves the annual audit engagement terms and fees, as well as any other audit services and specified categories of non-audit services, subject to certain pre-approved fee levels. Any fee overruns in excess of the established thresholds are presented to the Audit Committee for approval. In addition, pursuant to the policy, the Audit Committee authorized its Chairman to pre-approve other audit and permissible non-audit services in 2021 up to $250,000 per engagement and a maximum of $500,000 per year. The policy requires that the Audit Committee Chairman report any pre-approval decisions to the full Audit Committee at its next scheduled meeting. For the year ended December 31, 2021, the Audit Committee or its Chairman pre-approved all of the services provided by the Independent Auditors, which are described on page 35. The Audit Committee also is responsible for overseeing the audit fee negotiation associated with the retention of the Independent Auditors to perform the annual audit engagement.
18 | MOODY’S 2022 PROXY STATEMENT |
Notable Actions in 2021
During 2021, the Audit Committee continued to review and oversee the expansion of voluntary sustainability disclosures in the Company’s periodic filings with the SEC and certain other external reports that reflect recommendations from sustainability assessment organizations. Such disclosure included details regarding the Company’s human capital management provided in the Company’s Form 10-K for the year ended December 31, 2020.
The members of the Audit Committee are Ms Seidman (Chairman), Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Ms Hill, Mr. Howell, Mr. Serafin and Mr. Van Saun, each of whom is independent under NYSE and SEC rules and the Company’s Corporate Governance Principles. The Board of Directors has determined that each of Ms Seidman, Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Mr. Howell and Mr. Van Saun is an “audit committee financial expert” under the SEC’s rules. The Audit Committee held ten meetings during 2021.
The Audit Committee has reviewed and discussed with management and the Independent Auditors the audited financial statements of the Company for the year ended December 31, 2021 (the “Audited Financial Statements”), management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and the Independent Auditors’ evaluation of the Company’s system of internal control over financial reporting. In addition, the Audit Committee has discussed with KPMG LLP, which reports directly to the Audit Committee, the matters that independent registered public accounting firms must communicate to audit committees under applicable Public Company Accounting Oversight Board (“PCAOB”) and SEC standards.
The Audit Committee also has discussed with KPMG LLP its independence from the Company, including the matters contained in the written disclosures and letter required by applicable requirements of the PCAOB regarding independent registered public accounting firms’ communications with audit committees about independence. The Audit Committee also has discussed with management of the Company and KPMG LLP such other matters and received such assurances from them as it deemed appropriate. The Audit Committee also considers whether the rendering of non-audit services by KPMG LLP to the Company is compatible with maintaining the independence of KPMG LLP from the Company. The Company historically has used KPMG LLP for only a limited number of non-audit services each year.
Following the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the Audited Financial Statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for filing with the SEC.
Bruce Van Saun
Director since March 2016
Bruce Van Saun, age 60, is a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. He has served as Chairman and Chief Executive Officer, of
Citizens Financial Group, Inc.
✓ Independent C: Chairman M: Member
4 | MOODY’S 2022 PROXY STATEMENT |
Moody’s manages its business with the goal of delivering value to all of its stakeholders, including its customers, employees, business partners, local communities and stockholders. Moody’s advances its commitment to sustainability by considering environmental, social, and governance (“ESG”) factors throughout its operations and products and services. It uses its expertise and assets to make a positive difference through technology tools, research and analytical services that help other organizations and the investor community better understand the links between sustainability considerations and the global markets. Moody’s efforts to help market participants evaluate risk by integrating ESG considerations into capital allocations and long-term planning include the following:
• | formed Moody’s ESG Solutions to align its product and service offerings to meet the growing global demand for ESG capabilities |
• | acquired RMS, a |
Moody’s efforts to promote sustainability-related thought leadership, assessments and data to market participants include following the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate and assess performance, including the Global Reporting Initiative (“GRI”) and the Sustainability Accounting Standards Board (“SASB”). The Company also issues an annual report on how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. Moody’s sustainability-related achievements in 2021 included the following:
• | recognized as a 2021 Global Compact LEAD company for its ongoing commitment to the |
• | recognized with CDP’s ‘A’ Score on Climate Action for the second consecutive year, making Moody’s one of |
• | released its inaugural Stakeholder Sustainability Report, which details Moody’s focus on sustainability and its progress toward incorporating ESG considerations across its products and corporate operations |
• | joined the Taskforce on Nature-related Financial Disclosures (“TNFD”) to help develop a reporting framework and act on evolving nature-related risks |
2020 Decarbonization Plan—Advisory Say-on-Climate Resolution
Last year, the Board determined to submit the Company’s 2020 Decarbonization Plan (the “2020 Plan”) to a vote of stockholders following the Company’s discussions with TCI Fund Management Limited on behalf of the stockholder The Children’s Investment Master Fund. The 2020 Plan outlines our current science-based targets and strategies for realizing the Company’s climate ambitions, including the procurement of 100% of renewable electricity for the Company’s office spaces and optimizing efficiencies in its operations through a “Workplace of the Future”. The 2020 Plan received the support of 93% of the shares voted, which underscored that climate considerations and action are now an integral part of the Company’s business strategy, governance, and corporate performance.
MOODY’S | 5 |
As part of last year’s proposal, we also announced our intention to annually report on Moody’s assessment of our greenhouse gas (“GHG”) levels, our plan for reducing our GHG emissions, and our progress against that plan. The Company has implemented a number of initiatives to execute on the 2020 Plan, including the following:
Committing to achieve net-zero emissions across its operations and value chain by 2040, bringing its original target forward by 10 years;
Contracting towards meeting the Company’s 100% renewable electricity commitment for 2021;
Promoting energy efficiency through office programs aimed at energy conservation;
Expanding the Company’s engagement with suppliers relating to decarbonization from approximately 300 in 2020 to approximately 500 in 2021;
Procuring carbon offsets to match the remainder of our emissions from Scope 1, Scope 2, business travel and employee commuting;
Continuing to actively engage with stakeholders on climate-related issues; and
Updating the Company’s environmental sustainability, privacy and supplier policies to reflect the heightened expectations for both the Company and its partners.
Additional details on the Company’s progress will be disclosed as part of its 2021 TCFD report and 2022 CDP response.
Board Oversight of Sustainability Matters
The Board oversees sustainability matters, with assistance from the Audit, Governance & Nominating and Compensation & Human Resources Committees, as part of its oversight of management and the Company’s overall strategy. The Board also oversees Moody’s policies for assessing and managing the Company’s exposure to risk, including climate-related risks such as business continuity disruption and reputational or credibility concerns stemming from incorporation of climate-related risks into the credit methodologies and credit ratings of Moody’s Investors Service, Inc. (“Moody’s Investors Service” or “MIS”).
Audit Committee. Oversees financial, risk, accounting and Governance & Nominating Committee. Oversees sustainability matters, including significant issues of
Compensation & Human Resources Committee. Oversees inclusion of sustainability-related performance goals for determining compensation of certain senior executives (including the Named Executive Officers (as defined below)). | ||||
Expanded voluntary sustainability disclosure in its Form 10-K and 10-Qs Development of a robust ESG strategy for the Company More fully integrated sustainability-related performance metrics into the Strategic & Operational compensation metric of all senior executives | ||||
6 | MOODY’S 2022 PROXY STATEMENT |
DIVERSITY, EQUITY AND INCLUSION
The Board also oversees diversity, equity and inclusion (“DE&I”) matters, with assistance from the Compensation & Human Resources Committee. Management periodically presents to the directors on relevant topics, including diversity talent and DE&I matters more generally. In 2021, the Board oversaw the Company’s expanded public disclosure regarding DE&I matters in addition to the human capital management disclosure in the Company’s Annual Report and this Proxy Statement, as well as the public disclosure of its 2020 EEO-1 Report. The Company’s DE&I efforts aim to drive positive impact across our workforce, workplace, customers and communities. Recent Moody’s DE&I efforts included the following:
• | Established and enhanced employee programs, including launching a high potential initiative for women and diverse leaders and transforming the Senior Women Leadership Development Program |
• | became one of the |
• | Committed $1 million over five years to promote equal justice and advancement of the |
• | Launched Moody’s Multicultural Customer Initiative, which seeks to bring financial opportunities and economic revitalization to underserved communities |
The Board also oversees human capital matters, with assistance from the Compensation & Human Resources Committee. As a global integrated risk assessment firm, attracting, supporting and retaining skilled talent is essential to the Company’s success. Moody’s addresses these goals by: (i) promoting DE&I among employees; (ii) seeking to provide market-competitive compensation and benefits and rewarding employees for their contributions to the Company’s strategic and operational goals; (iii) offering wellness programs; (iv) supporting employee learning, development and skills enhancement; and (v) advancing employee engagement.
MOODY’S 2022 PROXY STATEMENT | 7 |
| DE&I | The Company’s key objectives include: (i) incorporating DE&I into Moody’s business strategy; (ii) establishing leadership accountability with respect to diversity including through executive compensation programs; (iii) working to increase diverse representation, e.g., women and ethnic groups; (iv) continuing to advance women and ethnically diverse employees in leadership roles; (v) enhancing employee training in diversity and inclusion matters; (vi) promoting equal employment opportunities in all aspects of employment; (vii) designing the Company’s compensation practices to provide equal pay for equal work; and (vii) incorporating market standards, role, experience and performance into compensation decisions. The executive leadership team’s focus on these items is vital to attract, support and retain its skilled talent. | ||||||||||||||||
Moody’s compensation programs are designed to foster and maintain a strong, capable, experienced and motivated global workforce. An important element of the Company’s compensation philosophy is aligning compensation to local market standards so that it can attract and retain the highly-skilled talent needed to thrive. Compensation is determined by factoring in both the Company’s financial performance as well as a qualitative assessment of strategic and operational metrics tied to key non-financial business objectives. | Compensation | |||||||||||||||||
Benefits and Wellness Programs | Moody’s is committed to providing competitive benefits programs designed to care for all employees and their families. The Company’s comprehensive programs offer resources for physical and mental health that promote preventive care and awareness and support a healthy lifestyle. The Company also promotes financial wellness and provides for flexible work arrangements. Beyond delivering health, welfare, retirement benefits, and paid vacation and sick days, the Company extends other benefits to supports its employees and their families. | |||||||||||||||||
The Company views learning and education as an investment in its people that aligns their professional goals and interests with the success of the firm, and helps to retain talent over the longer-term. A number of training programs are available, including leadership development, professional skills development, technical skills, as well as compliance training. | Learning & Development | |||||||||||||||||
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8 | MOODY’S 2022 PROXY STATEMENT |
In order to address evolving best practices and new regulatory requirements, the Board of Directors reviews its corporate governance practices and the charters for its standing committees at least annually. After performing its annual governance review for 2021, the Board determined to amend the Company’s Audit Committee charter. The Board also determined that no amendments were needed to the Company’s Corporate Governance Principles and its charters for the Governance & Nominating, Compensation & Human Resources and Executive Committees. A copy of the Corporate Governance Principles is available on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.” Copies of the charters of the Audit Committee, the Governance & Nominating Committee, the Compensation & Human Resources Committee and the Executive Committee are available on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents.” Print copies of the Corporate Governance Principles and the committee charters may also be obtained upon request, addressed to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. The Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee assist the Board in fulfilling its responsibilities, as described below. The Executive Committee has the authority to exercise the powers of the Board when it is not in session (subject to applicable law, rules and regulations, and the Company’s Certificate of Incorporation and By-Laws), advises management and performs other duties delegated to it by the Board from time to time.
During 2021, the Board of Directors met 14 times. The Board had four standing committees: an Audit Committee, a Governance & Nominating Committee, a Compensation & Human Resources Committee and an Executive Committee. All incumbent directors attended more than 85% of the total number of meetings of the Board and of all Board committees on which they served in 2021.
Please refer to page 17 for additional information regarding the Audit Committee, page 20 for additional information regarding the Governance & Nominating Committee and page 20 for additional information regarding the Compensation & Human Resources Committee. The Executive Committee did not meet in 2021. Directors are encouraged to attend the Annual Meeting. All individuals elected to the Board at the Company’s 2021 annual meeting of stockholders attended the meeting.
RECOMMENDATION OF DIRECTOR CANDIDATES
The Governance & Nominating Committee considers and makes recommendations to the Board regarding the size, structure, composition and functioning of the Board and engages in succession planning for the Board and key leadership roles on the Board and its committees. The Governance & Nominating Committee is also responsible for overseeing processes for the selection and nomination of director candidates. The Governance & Nominating Committee periodically reviews the skills, experience, characteristics and other criteria for identifying and evaluating directors, and recommends these criteria to the Board. The Governance & Nominating Committee will consider director candidates recommended by stockholders of the Company and may also engage independent search firms from time to time to assist in identifying and evaluating potential director candidates. In considering a candidate for Board membership, whether proposed by stockholders or otherwise, the Governance & Nominating Committee examines the candidate’s business experience, qualifications, attributes and skills relevant to the management and oversight of the Company’s business, independence, the ability to represent diverse stockholder interests, judgment, integrity, the ability to commit sufficient time and attention to Board activities, and the absence of any potential conflicts with the Company’s business
MOODY’S 2022 PROXY STATEMENT | 9 |
and interests. The Committee also seeks diverse occupational and personal backgrounds for the Board. See “Qualifications and Skills of Directors” on page 27 and “Director Nominees” beginning on page 28 for additional information on the Company’s directors. To have a candidate considered by the Governance & Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information:
The name of the stockholder and evidence of the stockholder’s ownership of Company stock, including the number of shares owned and the length of time of ownership; and
The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company, and the candidate’s consent to be named as a director if selected by the Governance & Nominating Committee and nominated by the Board.
The stockholder recommendation and information described above must be sent to the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or emailed to corporatesecretary@moodys.com, and must be received by the Corporate Secretary not later than 120 days prior to the first anniversary of the date the definitive proxy statement was first released to stockholders in connection with the preceding year’s annual meeting of stockholders. For the Company’s 2023 annual meeting of stockholders, this deadline is November 16, 2022.
The Governance & Nominating Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons who meet the criteria described above and might be available to serve on the Board. As described above, the Committee will also consider candidates recommended by stockholders on the same basis as those from other sources. The Governance & Nominating Committee, from time to time, also engages third party search firms that specialize in identifying director candidates for the Committee’s consideration.
Once a person has been identified by or for the Governance & Nominating Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Governance & Nominating Committee determines that the candidate warrants further consideration, the chairman or another member of the Committee contacts the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Governance & Nominating Committee requests information from the candidate, reviews the candidate’s accomplishments and qualifications, including in light of any other candidates whom the Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments.
The Company provides all new directors with an initial orientation session, which includes a comprehensive overview of the Company and the opportunity to meet with key leaders of the organization such as the Chief Executive Officer, Chief Financial Officer, General Counsel, the Presidents of MIS and Moody’s Analytics, Inc. (“Moody’s Analytics” or “MA”), the Chief Strategy Officer, the Chief Audit Executive, the Chief Information Officer and the Controller. This orientation includes, among other topics, an overview of the Company’s business, including MIS and MA, corporate governance, compliance program, strategy, technology and cybersecurity, enterprise risk management, and legal and regulatory matters.
Board and committee meetings, industry and corporate governance update presentations, periodic reports from the Company’s businesses and external training programs also provide the
10 | MOODY’S 2022 PROXY STATEMENT |
Company’s directors with continuing education throughout their tenure. In 2021, outside counsel presented to the Board regarding board oversight considerations with respect to ESG trends and developments. The Company reimburses directors for expenses associated with attendance at external education programs.
The Board periodically reviews its leadership structure to evaluate whether the structure remains appropriate and make a determination regarding whether or not to separate the roles of Chairman and Chief Executive Officer based upon the circumstances. The Company’s Corporate Governance Principles permit the roles of Chairman and Chief Executive Officer to be filled by a single person or different individuals. This flexibility allows the Board to review the structure of the Board periodically and determine whether to separate the two roles based upon the Company’s needs and circumstances from time to time.
In 2021, in connection with the retirement of Mr. McDaniel as President and Chief Executive Officer of the Company, the Board elected Mr. McDaniel to serve as Chairman of the Board. In addition, in light of the Board’s continued belief that strong, independent Board leadership is a critical aspect of effective corporate governance, the Board amended the Corporate Governance Principles to provide that, whenever and for so long as the Chairman is not an independent director, the independent directors will appoint an independent director to serve as the Lead Independent Director. In 2021, the independent directors appointed Mr. Forlenza to serve as Lead Independent Director for a term expiring at the Annual Meeting.
The role of Lead Independent Director is designed to support the Company’s strong, independent Board leadership and enhance candor and communication between the independent members of the Board, the non-executive Chairman, and the Company’s Chief Executive Officer. In support of this goal, the Lead Independent Director has a robust set of responsibilities, including:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Setting the agenda for executive sessions;
Reviewing and approving the agenda, materials, and schedule for Board meetings, as well as other information sent to the Board;
Serving as principal liaison among the independent directors and on Board-wide issues between the independent directors and the Chairman or Chief Executive Officer; and
Being available for consultation and communication with major stockholders, as appropriate.
In addition to Mr. Forlenza’s role as Lead Independent Director, he also serves as Chairman of the Governance & Nominating Committee.
CODES OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a code of ethics that applies to its Chief Executive Officer, Chief Financial Officer and Controller, or persons performing similar functions. The Company has also adopted a code of business conduct and ethics that applies to the Company’s directors, officers and employees. A current copy of each of these codes is available on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.” A copy of each is also available in print to stockholders upon request, addressed to the Corporate Secretary of the Company at 7 World Trade
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Center at 250 Greenwich Street, New York, New York 10007. The Company intends to satisfy disclosure requirements regarding any amendments to, or waivers from, the codes of ethics by posting such information on the Company’s website at www.moodys.com under the headings “About Us—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.”
To assist it in making determinations of a director’s independence, the Board has adopted independence standards that are set forth below and are included in the Company’s Corporate Governance Principles. The Board has determined that Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Ms Hill, Mr. Howell, Ms Seidman, Mr. Serafin and Mr. Van Saun and thus a majority of the directors on the Board, are independent under these standards. In addition, the Board had previously determined that Mr. Anderson and Dr. McKinnell, who retired from the Board effective April 20, 2021, the date of Moody’s 2021 annual meeting, were independent under these standards. The standards adopted by the Board incorporate the director independence criteria included in the New York Stock Exchange (the “NYSE”) listing standards, as well as additional criteria established by the Board. The Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee are composed entirely of independent directors. In accordance with NYSE requirements and the independence standards adopted by the Board, all members of the Audit Committee and the Compensation & Human Resources Committee meet additional heightened independence standards applicable to audit committee and compensation committee members.
An “independent” director is a director whom the Board has determined has no material relationship with the Company or any of its consolidated subsidiaries (for purposes of this section, collectively referred to as the “Company”), either directly, or as a partner, stockholder or officer of an organization that has a relationship with the Company. For purposes of this definition, the Board has determined that a director is not independent if:
1. | the director is, or in the past three years has been, an employee of the Company, or an immediate family member of the director is, or in the past three years has been, an executive officer of the Company; |
2. | (a) the director, or an immediate family member of the director, is a current partner of the Company’s outside auditor; (b) the director is a current employee of the Company’s outside auditor; (c) a member of the director’s immediate family is a current employee of the Company’s outside auditor and personally works on the Company’s audit; or (d) the director or an immediate family member of the director was in the past three years a partner or employee of the Company’s outside auditor and personally worked on the Company’s audit within that time; |
3. | the director, or a member of the director’s immediate family, is or in the past three years has been, an executive officer of another company where any of the Company’s present executive officers serves or served on the compensation committee at the same time; |
4. | the director, or a member of the director’s immediate family, has received, during any 12-month period in the past three years, any direct compensation from the Company in excess of $120,000, other than compensation for Board service, compensation received by the director’s immediate family member for service as an employee (other than an executive officer) of the Company, and pension or other forms of deferred compensation for prior service with the Company; |
5. | the director is a current executive officer or employee, or a member of the director’s immediate family is a current executive officer of another company that makes payments to |
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or receives payments from the Company, or during any of the last three fiscal years, has made payments to or received payments from the Company, for property or services in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues; or |
6. | the director, or the director’s spouse, is an executive officer of a non-profit organization to which the Company or the Company foundation makes, or in the past three years has made, contributions that, in any single fiscal year, exceeded the greater of $1 million or 2% of the non-profit organization’s consolidated gross revenues. (Amounts that the Company foundation contributes under matching gifts programs are not included in the contributions calculated for purposes of this standard.) |
An “immediate family” member includes a director’s spouse, parents, children, siblings, mother- and father-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than a domestic employee) who shares the director’s home.
In addition, a director is not considered independent for purposes of serving on the Audit Committee, and may not serve on the Audit Committee, if the director: (a) accepts, directly or indirectly, from Moody’s Corporation or any of its subsidiaries, any consulting, advisory, or other compensatory fee, other than Board and committee fees and fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with Moody’s Corporation; or (b) is an “affiliated person” of Moody’s Corporation or any of its subsidiaries; each as determined in accordance with U.S. Securities and Exchange Commission (“SEC”) regulations.
Furthermore, in determining whether a director is considered independent for purposes of serving on the Compensation & Human Resources Committee, the Board must consider all factors specifically relevant to determining whether the director has a relationship with the Company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (a) the source of the director’s compensation, including any consulting, advisory or other compensatory fee paid by the Company to the director; and (b) whether the director is affiliated with Moody’s Corporation, any of its subsidiaries or an affiliate of any subsidiary; each as determined in accordance with SEC regulations.
In assessing independence, the Board took into account that Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Ms Hill, Mr. Howell, Ms Seidman and Mr. Van Saun each served during 2021, or currently serves (and that Mr. Anderson and Dr. McKinnell each served, prior to their retirement from the Board), as directors, employees or trustees of entities that are rated or have issued securities rated by Moody’s Investors Service, as listed in the Company’s Director and Shareholder Affiliation Policy posted on the Company’s website under the headings “About Moody’s—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents,” and that in 2021 the associated fees from each such entity accounted for less than 1% of annual revenues of the Company and each of the other entities. In addition, the Board took into account that the Company from time to time engages in business with entities where one of our directors, director candidates or their immediate family members are employed or have other relationships. The Board found nothing in the relationships to be contrary to the standards for determining independence as contained in the NYSE’s requirements and the Company’s Corporate Governance Principles. A copy of these standards is found in Attachment A to the Company’s Corporate Governance Principles on the Company’s website at www.moodys.com under the headings “About Moody’s—Investor Relations—Corporate Governance—Charter Documents—Other Governance Documents.”
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BOARD AND COMMITTEE EVALUATION PROCESS
The Company’s Board and committee evaluation process is summarized below. The topics considered during the evaluation include Board effectiveness in overseeing key areas, such as strategy and risk, performance of committees’ duties under their respective charters, Board and committee operations, and individual director performance.
1 | Review of Evaluation Process. The Governance & Nominating Committee annually reviews the evaluation process, including the evaluation method, to ensure that constructive feedback is solicited on the performance of the Board, its Committees, and individual directors. | |
2 | Questionnaire and One-on-One Interviews. The Board, the Audit Committee, the Compensation & Human Resources Committee and the Governance & Nominating Committee each conducts an annual self-evaluation through the use of a written questionnaire. All directors, other than the Chairman and the Lead Independent Director, also evaluate Chairman and Lead Independent Director performance through a written questionnaire. All questionnaires include open-ended questions to solicit direct feedback and the responses are collected on an unattributed basis. In addition, the Chairman and the Lead Independent Director conduct annual interviews with each non-management director to discuss individual Board member performance. | |
3 | Summary of Written Evaluations. Directors’ responses to the questionnaires are aggregated without attribution and shared with the full Board and the applicable committees. All responses, including written comments, are provided along with an overview of the high and low scores on various topics. | |
4 | Board and Committee Review. Using aggregated results as a reference, the Audit Committee and
| |
5 | Actions. The Board decides on specific actions to incorporate feedback received, including making any appropriate changes to Board- and committee-related practices. |
THE BOARD’S ROLE IN THE OVERSIGHT OF COMPANY RISK
The Board of Directors oversees the Company’s enterprise-wide approach to the major risks facing the Company and, with the assistance of the Audit Committee and the Compensation & Human Resources Committee, oversees the Company’s policies for assessing and managing its exposure to risk. The Audit Committee reviews the Company’s charters, frameworks and approach to enterprise-wide risk assessment and risk management, financial and compliance risks, including risks relating to internal controls and cyber risks, and major legislative and regulatory developments that could materially affect the Company. The Audit Committee reviews the implementation and effectiveness of the Company’s enterprise risk management program with the Chief Risk Officer. In addition, the Board periodically reviews these risks and, with the assistance of the Audit Committee, the Company’s risk management processes, including in connection with its review of the Company’s strategy. The Audit Committee’s responsibilities include reviewing the Company’s practices with respect to risk assessment and risk management and the Board’s responsibility includes reviewing contingent liabilities and risks that may be material to the Company. The Compensation & Human Resources Committee oversees
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management’s assessment of whether the Company’s compensation structure, policies and programs create risks that are reasonably likely to have a material adverse effect on the Company and reviews the results of this assessment. The Governance & Nominating Committee oversees risks related to governance, including with respect to succession planning for the Board, and sustainability matters.
Under the oversight of the Board and its committees, the Chief Executive Officer has established an Enterprise-Wide Risk Committee, comprised of the Chief Executive Officer and his direct reports, which include the Chief Risk Officer. The Enterprise-Wide Risk Committee reviews the work of the Enterprise Risk Function that is managed by the Chief Risk Officer. The Chief Risk Officer oversees risk officers for the Company’s two business segments, MIS and MA, and the support functions in Moody’s Shared Services, Inc. who periodically report on risks and their mitigations within their areas of responsibility. Among other things, the Enterprise Risk Function is responsible for identifying and monitoring existing and emerging risks that are important to the achievement of the Company’s strategic and operative objectives; reviewing appropriate polices, monitoring and reporting frameworks to support effective management of important risks as applicable; reviewing and evaluating the effectiveness of management processes and action plans to address such risks; advising on and recommending to executive management any significant actions or initiatives that they believe are necessary to effectively manage risk; and seeing that activities of discrete risk management disciplines within the Company are appropriately coordinated. The Chief Risk Officer presented the Enterprise Risk Committee’s analysis to the directors six times in 2021. Additionally, the Audit Committee, the Governance & Nominating Committee and the Compensation & Human Resources Committee reviewed risks within their areas of responsibility at separate meetings in 2021. Significant risk issues evaluated by and/or major changes proposed by the Enterprise-Wide Risk Committee and the Chief Risk Officer are discussed at various Board meetings throughout the year.
Board’s Role in Cybersecurity Oversight
The Board of Directors provides oversight of management’s efforts to identify and mitigate cybersecurity risks and respond to cyber threats. The enterprise-wide Cyber Enterprise Risk Management Committee, led by the Chief Information Security Officer (“CISO”), is responsible for validating that the Company has people, process and technology capabilities to identify, mitigate, and report on the Company’s cyber risk posture to the Company’s executive team and the Board. The Board is updated on a quarterly basis by the CISO and the Chief Information Officer, with escalations to the Board handled through management, as needed. In addition, the Audit Committee reviews the Company’s financial and compliance risks, including, but not limited to, risks relating to internal controls and cyber risks, and the Chairman of the Audit Committee holds a Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University.
The independent directors routinely meet in executive session at regularly scheduled Board meetings. Vincent A. Forlenza, the Board’s Lead Independent Director, establishes the agenda for and presides at these sessions and has the authority to call additional sessions as appropriate.
The Board of Directors has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may communicate with the Board of Directors or with all non-management directors as a group, or with a specific director or
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directors (including the Chairman of the Board), by writing to them c/o the Corporate Secretary of the Company at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 or sending an email to corporatesecretary@moodys.com.
The Board has instructed the Corporate Secretary to review correspondence directed to the Board of Directors and, at the Corporate Secretary’s discretion, to forward items that she deems to be appropriate for the Board’s consideration.
The Board and the Compensation & Human Resources Committee review succession planning annually in conjunction with the Board’s review of strategic planning. The Board conducted extensive discussions regarding the CEO transition as well as succession planning and development of the senior leadership group. In addition, in light of the COVID-19 pandemic, the Board also reviewed the Company’s business continuity plans, which included emergency succession plans for key executives.
ANTI-HEDGING AND ANTI-PLEDGING POLICY; SHORT SALES AND OTHER SPECULATIVE TRADES
All executive officers, directors and their family members are subject to a securities trading policy under which they are prohibited from hedging and pledging Moody’s securities, including any publicly traded securities of a Moody’s subsidiary. The term “family member” is defined in the Company’s policy against insider trading and generally includes family members or entities that hold, purchase or sell Company stock that is attributed to the director or officer. Specifically, the following activities are prohibited under the policy:
Making “short sales” of Moody’s securities. A short sale has occurred if the seller: (i) does not own the securities sold; or (ii) does own the securities sold, but does not deliver or transmit them within the customary settlement period.
Engaging in short-term or speculative transactions or entering into any transaction (including purchasing or selling forward contracts, equity swaps, puts or calls) that is designed to offset any decrease in the market value of or is otherwise based on the price of Moody’s securities.
Holding Moody’s securities in margin accounts, buying Moody’s securities on margin or pledging Moody’s securities as collateral for a loan.
Employees who are not executive officers (and their family members) are prohibited from: (i) making short sales of Moody’s securities; (ii) buying Moody’s securities on margin or in any account in which a financial firm lends cash to purchase the securities; and (iii) engaging in short-term or speculative transactions involving Moody’s securities, including buying or selling put or call options and entering into other derivative transactions involving Moody’s securities. The restrictions in clause (iii) do not prohibit the exercise of Moody’s stock options that employees receive in connection with their compensation.
The Chief Executive Officer, Chief Financial Officer and certain other officers of the Company enter into Rule 10b5-1 stock trading plans from time to time. These plans allow executives to adopt predetermined procedures for trading shares of Company stock in advance of learning any material non-public information. The use of these trading plans permits diversification, retirement and tax planning activities. The transactions under the plans are disclosed publicly through Form 4 filings with the SEC.
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The Audit Committee represents and assists the Board of Directors in its oversight responsibilities relating to: the integrity of the Company’s financial statements and the financial information provided to the Company’s stockholders and others; the Company’s compliance with legal and regulatory requirements; the Company’s internal controls; the Company’s policies with respect to risk assessment and risk management, and the review of contingent liabilities and risks that might be material to the Company; and the audit process, including the qualifications and independence of the Company’s principal external auditors (the “Independent Auditors”), and the performance of the Independent Auditors and the Company’s internal audit function.
Oversight of Audit Processes
As part of the Audit Committee’s oversight of the audit process, the Audit Committee and its Chairman are directly involved in the selection of the lead engagement partner when there is a rotation required under applicable rules, and the Audit Committee reviews and concurs in the appointment and compensation of the head of the Company’s internal audit function (the “Chief Audit Executive”). The Committee provides input regarding the annual evaluation of the Chief Audit Executive. The Committee also approves the fees and terms associated with the retention of the Independent Auditors to perform the annual engagement. In determining whether to approve services proposed to be provided by the Independent Auditors, the Committee is provided with summaries of the services, the fee associated with each service as well as information regarding incremental fees to be approved. The Committee also receives benchmarking data for audits of companies of similar sizes and audits of comparable complexity in order to determine the reasonableness of the proposed fees.
Responsibilities under the Audit Committee Charter
In fulfilling the responsibilities under its charter, the Audit Committee:
Discusses with, and receives regular status reports from, the Independent Auditors and the Chief Audit Executive on the overall scope and plans for their audits, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. Also receives regular updates on the Company’s internal control over financial reporting, and discusses with management and the Independent Auditors their evaluations and conclusions with respect to internal control over financial reporting.
Meets with the Independent Auditors and the Chief Audit Executive, with and without management present, to discuss the results of their respective audits, in addition to holding meetings with members of management, including the General Counsel.
Reviews significant accounting policies, critical estimates and disclosures with management and the Independent Auditors, including the implementation of any new accounting standards or requirements.
Reviews and discusses with management and the Independent Auditors the Company’s earnings press releases and periodic filings made with the SEC, including the use of information that is provided to enhance understanding of the results presented in accordance with GAAP.
Oversees financial, risk and other disclosures made in the Company’s annual and quarterly reports related to sustainability, and at least annually reviews reports by management regarding the adequacy and effectiveness of the Company’s internal controls and procedures related to such disclosures.
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Oversees the implementation of new financial reporting systems and their related internal controls.
Reviews the Company’s financial and compliance risks, including, but not limited to, risks relating to internal controls and cyber risks.
Receives periodic reports on the effectiveness of the Company’s compliance program and regular status reports on compliance issues, including reports required by the Audit Committee’s policy for the receipt, retention and treatment of any complaints received by the Company regarding accounting, internal accounting control, auditing and federal securities law matters.
Reviews its charter annually and conducts an annual self-evaluation to assess its performance.
The Audit Committee also has the authority, at the Company’s expense, to engage its own outside advisors, including experts in particular areas of accounting, as it determines appropriate.
Ongoing Assessment of the Independent Auditors
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Independent Auditors and, as such, the Independent Auditors report directly to the Audit Committee. KPMG LLP has served as the Company’s Independent Auditors since 2008, and was re-appointed at the conclusion of a competitive process that the Audit Committee conducted in 2019 to review the selection of the Company’s Independent Auditors. In selecting the Independent Auditors, the Committee considered the relative costs, benefits, challenges, potential impact, and overall advisability of selecting different Independent Auditors. In addition, the Audit Committee conducts an annual performance assessment of the Independent Auditors, seeking performance feedback from all the members of the Committee as well as from officers with audit-related responsibilities. The factors the Audit Committee considered in conducting this assessment included: independence, objectivity and integrity; quality of services and the ability to meet performance delivery dates; responsiveness and ability to adapt; proactivity in identification of opportunities and risks; performance of the lead engagement partners as well as other team members; technical expertise; enhancement of the audit process using more digital tools; understanding of the Company’s business and industry; effectiveness of their communication; sufficiency of resources; fee levels in light of the services rendered; and management feedback.
Policy on Pre-Approval of Independent Auditors Fees
The Audit Committee has established a policy setting forth the requirements for the pre-approval of audit and permissible non-audit services to be provided by the Independent Auditors. Under the policy, the Audit Committee pre-approves the annual audit engagement terms and fees, as well as any other audit services and specified categories of non-audit services, subject to certain pre-approved fee levels. Any fee overruns in excess of the established thresholds are presented to the Audit Committee for approval. In addition, pursuant to the policy, the Audit Committee authorized its Chairman to pre-approve other audit and permissible non-audit services in 2021 up to $250,000 per engagement and a maximum of $500,000 per year. The policy requires that the Audit Committee Chairman report any pre-approval decisions to the full Audit Committee at its next scheduled meeting. For the year ended December 31, 2021, the Audit Committee or its Chairman pre-approved all of the services provided by the Independent Auditors, which are described on page 35. The Audit Committee also is responsible for overseeing the audit fee negotiation associated with the retention of the Independent Auditors to perform the annual audit engagement.
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Notable Actions in 2021
During 2021, the Audit Committee continued to review and oversee the expansion of voluntary sustainability disclosures in the Company’s periodic filings with the SEC and certain other external reports that reflect recommendations from sustainability assessment organizations. Such disclosure included details regarding the Company’s human capital management provided in the Company’s Form 10-K for the year ended December 31, 2020.
The members of the Audit Committee are Ms Seidman (Chairman), Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Ms Hill, Mr. Howell, Mr. Serafin and Mr. Van Saun, each of whom is independent under NYSE and SEC rules and the Company’s Corporate Governance Principles. The Board of Directors has determined that each of Ms Seidman, Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Mr. Howell and Mr. Van Saun is an “audit committee financial expert” under the SEC’s rules. The Audit Committee held ten meetings during 2021.
The Audit Committee has reviewed and discussed with management and the Independent Auditors the audited financial statements of the Company for the year ended December 31, 2021 (the “Audited Financial Statements”), management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and the Independent Auditors’ evaluation of the Company’s system of internal control over financial reporting. In addition, the Audit Committee has discussed with KPMG LLP, which reports directly to the Audit Committee, the matters that independent registered public accounting firms must communicate to audit committees under applicable Public Company Accounting Oversight Board (“PCAOB”) and SEC standards.
The Audit Committee also has discussed with KPMG LLP its independence from the Company, including the matters contained in the written disclosures and letter required by applicable requirements of the PCAOB regarding independent registered public accounting firms’ communications with audit committees about independence. The Audit Committee also has discussed with management of the Company and KPMG LLP such other matters and received such assurances from them as it deemed appropriate. The Audit Committee also considers whether the rendering of non-audit services by KPMG LLP to the Company is compatible with maintaining the independence of KPMG LLP from the Company. The Company historically has used KPMG LLP for only a limited number of non-audit services each year.
Following the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the Audited Financial Statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for filing with the SEC.
The Audit Committee
Leslie F. Seidman, Chairman
Jorge A. Bermudez
Thérèse Esperdy
Vincent A. Forlenza
Kathryn M. Hill
Lloyd W. Howell, Jr.
Zig Serafin
Bruce Van Saun
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THE GOVERNANCE & NOMINATING COMMITTEE
The Governance & Nominating Committee identifies and evaluates possible candidates to serve on the Board and recommends the Company’s director nominees for approval by the Board and the Company’s stockholders. The Governance & Nominating Committee also considers and makes recommendations to the Board of Directors concerning the size, structure, composition and functioning of the Board and its committees, oversees the evaluation of the Board, and develops and reviews the Company’s Corporate Governance Principles.
With respect to the evaluation of the Board, the Governance & Nominating Committee oversees a process for annually assessing the performance, contributions and the independence of incumbent directors in determining whether to recommend them for reelection to the Board. The Board, the Audit Committee, the Compensation & Human Resources Committee and the Governance & Nominating Committee, under that Committee’s oversight, each conducts an annual self-evaluation to assess its performance. The Chairman of the Board and the Lead Independent Director conduct annual interviews during which individual Board member evaluations are conducted.
In addition, the Governance & Nominating Committee oversees sustainability matters, including significant issues of corporate social and environmental responsibility, as they pertain to the Company’s business.
The members of the Governance & Nominating Committee are Mr. Forlenza (Chairman), Mr. Bermudez, Ms Esperdy, Ms Hill, Mr. Howell, Ms Seidman, Mr. Serafin and Mr. Van Saun, each of whom is independent under NYSE rules and under the Company’s Corporate Governance Principles. The Governance & Nominating Committee met seven times during 2021.
THE COMPENSATION & HUMAN RESOURCES COMMITTEE
The Compensation & Human Resources Committee oversees the Company’s overall compensation structure, policies and programs, assesses whether the Company’s compensation structure establishes appropriate incentives for management and employees, and considers the results of the most recent vote on the Company’s advisory resolution approving executive compensation. The Committee also oversees the evaluation of senior management, including by reviewing and approving performance goals for the Company’s Chief Executive Officer and other executive officers, and by evaluating their performance against approved goals, including goals relating to sustainability. The Committee oversees and makes the final decisions regarding compensation arrangements for the Chief Executive Officer and for certain other executive officers, including the named executive officers. The Chief Executive Officer makes recommendations to the Committee regarding the amount and form of executive compensation (except with respect to his compensation). In addition, the Chief Financial Officer presents at all regularly scheduled Committee meetings. For a description of this process, see the Compensation Discussion and Analysis (the “Compensation Discussion and Analysis” or “CD&A”), beginning on page 39.
The Committee administers and makes recommendations to the Board with respect to the Company’s incentive compensation and equity-based compensation plans that are subject to Board approval, including the Company’s key employees’ stock incentive plans. The Committee has authority, acting in a settlor capacity, to establish, amend and terminate the Company’s employee benefit plans, programs and practices, and to review reports from management regarding the funding, investments and other features of such plans, and the Committee delegates to management the responsibilities it has with respect to the Company’s employee benefit plans, programs and practices as the Committee deems appropriate. The Committee also periodically reviews other important employee and human
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capital matters such as DE&I, succession planning, wellness programs and learning and development. As discussed below, the Committee annually reviews the form and amount of compensation of directors for service on the Board and its committees and recommends any changes to the Board.
The Committee is empowered to retain, at the Company’s expense, such consultants, counsel or other outside advisors as it determines appropriate to assist it in the performance of its functions. In 2021, the Committee retained the services of Meridian Compensation Partners LLC (“Meridian”), an independent compensation consulting company, to provide advice and information about executive and director compensation, including the competitiveness of pay levels, executive compensation design and governance issues, and market trends, as well as technical and compliance considerations. Meridian reports directly and solely to the Compensation & Human Resources Committee. Meridian exclusively provides executive and director compensation consulting services and does not provide any other services to the Company.
The Committee regularly reviews the current engagements and the objectivity and independence of the advice that Meridian provides to the Committee on executive and director compensation. The Committee considered the six specific independence factors adopted by the SEC and the NYSE under Dodd-Frank and other factors it deemed relevant, and the Committee found no conflicts of interest or other factors that would adversely affect Meridian’s independence.
During 2021, management continued to engage Aon Consulting (formerly called Aon Hewitt) as management’s compensation consultant. Aon Consulting worked with the Chief Human Resources Officer and her staff to develop market data regarding Moody’s executive compensation programs. The Committee takes into account that Aon Consulting provides executive compensation-related services to management when it evaluates the information and analyses provided by Aon Consulting.
The members of the Compensation & Human Resources Committee are Ms Hill (Chairman), Mr. Bermudez, Ms Esperdy, Mr. Forlenza, Mr. Howell, Ms Seidman, Mr. Serafin and Mr. Van Saun, each of whom is independent under NYSE rules and under the Company’s Corporate Governance Principles. The Compensation & Human Resources Committee met five times during 2021.
REPORT OF THE COMPENSATION & HUMAN RESOURCES COMMITTEE
The Compensation & Human Resources Committee assists the Board in fulfilling its oversight responsibility relating to, among other things, establishing and reviewing compensation of the Company’s executive officers. In this context, the Compensation & Human Resources Committee reviewed and discussed with management the Company’s Compensation Discussion and Analysis, beginning on page 39. Following such reviews and discussions, the Compensation & Human Resources Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation & Human Resources Committee
Kathryn M. Hill, Chairman
Jorge A. Bermudez
Thérèse Esperdy
Vincent A. Forlenza
Lloyd W. Howell
Leslie F. Seidman
Zig Serafin
Bruce Van Saun
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RELATIONSHIP OF COMPENSATION PRACTICES TO RISK MANAGEMENT
When structuring its overall compensation practices for employees of the Company, consideration is given as to whether the structure creates incentives for risk-taking behavior and therefore affects the Company’s risk management practices. Attention is given to the elements and the mix of pay as well as seeing that employees’ compensation is aligned with stockholders’ value.
In order to assess whether the Company’s compensation practices and programs create risks that are reasonably likely to have a material adverse effect on the Company, management established a compensation risk committee led by the Chief Human Resources Officer to assess the risk related to the Company’s compensation plans, practices and programs. As part of this annual review, the compensation risk committee assessed the following items: (i) the relative proportion of variable to fixed components of compensation, (ii) the mix of performance periods (short-term, medium-term and long-term), (iii) the mix of payment mechanisms (cash, options, restricted stock units (“RSUs”) and performance shares), (iv) the design of the incentive compensation programs, including the performance metrics used, linking the creation of value and earnings quality and sustainability, (v) the process of setting goals, degree of difficulty, spreads between thresholds, targets and maximum payouts and ratios of payouts as a fraction of earnings, (vi) the maximum payout levels and caps, (vii) the clawback policy and other compensation-related governance policies, (viii) the retirement program design and (ix) the equity ownership and retention guidelines. These items were assessed in the context of the most significant risks currently facing the Company to determine if the compensation plans, practices and programs incentivize employees to take undue risks. The committee then took into account controls and procedures that operate to monitor and mitigate against risk. The Chief Human Resources Officer presented the compensation risk committee’s conclusions to the Compensation & Human Resources Committee. These conclusions were also reviewed by the Compensation & Human Resources Committee’s independent compensation consultant, Meridian.
The Compensation & Human Resources Committee reviewed these conclusions through a risk assessment lens. As a result of these reviews, the Company does not believe that the Company’s compensation practices and programs create risks that are reasonably likely to have a material adverse effect on the Company, nor does it believe that the practices and programs are designed to promote undue risk taking.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee is charged with monitoring and reviewing issues involving potential conflicts of interest, and reviewing and approving related person transactions. In 2022, the Audit Committee reviewed and adopted written Related Person Transaction Policies and Procedures (the “Policy”), which requires the Audit Committee to review and approve transactions in which (i) the aggregate amount involved is or is expected to exceed $120,000, (ii) the Company or any of its subsidiaries is a participant, and (iii) any related person has a direct or indirect interest. Under the Policy, related persons include (i) any person who is or was during the last fiscal year a director, executive officer, or any nominee for director, (ii) any person owning 5% or more of the Company’s Common Stock, and (iii) any immediate family members of such persons. Under the Policy, the Audit Committee has pre-approved several categories of transactions with related persons. For transactions that are not pre-approved under the Policy, in reviewing and determining whether to approve related person transactions, the Audit Committee takes into account whether the transaction is available to an unaffiliated third party under the same or similar circumstances, the extent of the related person’s interest in the transaction, and other factors as the Audit Committee deems appropriate. The Audit Committee will not approve any related person transaction if it determines it to be inconsistent with the
22 | MOODY’S 2022 PROXY STATEMENT |
interests of the Company and its stockholders. No director may participate in any discussion or approval of a transaction for which he or she or a member of his or her immediate family is a related person.
In addition, under the Company’s Code of Business Conduct and Code of Ethics, special rules apply to executive officers and directors who engage in conduct that creates an actual, apparent or potential conflict of interest. Before engaging in such conduct, such executive officers and directors must make full disclosure of all the facts and circumstances to the Company’s General Counsel and the Audit Committee Chairman, and obtain the prior written approval of the Audit Committee. All conduct is reviewed in a manner so as to (i) maintain the Company’s credibility in the market, (ii) maintain the independence of the Company’s employees and (iii) see that all business decisions are made solely on the basis of the best interests of the Company and not for personal benefit.
Our director compensation program is designed to compensate our non-employee directors fairly for work required for a company of our size and scope and to align their interests with the long-term interests of our stockholders. The Compensation & Human Resources Committee annually reviews the form and amount of the compensation of directors for service on the Board and its committees and recommends any changes to the Board. As part of its 2021 review, the Compensation & Human Resources Committee reviewed and considered data provided to the Committee by Meridian regarding the form and amount of compensation paid to non-management directors at the companies in Moody’s executive compensation peer group (as disclosed beginning on page 44 of this Proxy Statement). The comparative analysis included each element of the director pay program: the annual cash retainer, board and committee fees as well as equity awards. This analysis showed that Moody’s director compensation is competitively positioned relative to the median of its peer group. Its equity to cash ratio was found to be similar to the peer group average and, like many of its peers, Moody’s directors are subject to stock holdings requirements (a multiple of the cash retainer). Moody’s does not provide per-meeting fees for board and committee meetings or any non-chairman committee member fees.
As a result of this review, the Compensation & Human Resources Committee determined that compensation of directors on the Board and its committees is reasonable and appropriate as compared to the board members of peer companies. As noted below, the Chairman of the Board and the Lead Independent Director received additional annual cash fees.
MOODY’S 2022 PROXY STATEMENT | 23 |
The following table sets forth, for the fiscal year ended December 31, 2021, the total compensation of the non-management members of the Company’s Board of Directors. Mr. Fauber did not receive any compensation for serving as a Moody’s director in 2021. His compensation for services as Moody’s President and Chief Executive Officer during the year is reflected in the Summary Compensation Table on page 60 of this Proxy Statement.
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | All Other Compensation ($) (3) | Total ($) | ||||||||||||
Basil Anderson (4) | $ | 52,500 |
| $ | 389,756 (5) |
|
| — |
| $ | 442,256 |
| ||||
Jorge Bermudez |
| 105,000 |
|
| 179,946 |
|
| — |
|
| 284,946 |
| ||||
Thérèse Esperdy |
| 105,000 |
|
| 179,946 |
|
| — |
|
| 284,946 |
| ||||
Vincent Forlenza |
| 170,000 |
|
| 179,946 |
|
| — |
|
| 349,946 |
| ||||
Kathryn Hill |
| 130,000 |
|
| 179,946 |
|
| — |
|
| 309,946 |
| ||||
Lloyd W. Howell, Jr. |
| 105,000 |
|
| 179,866 |
|
| — |
|
| 284,866 |
| ||||
Raymond W. McDaniel, Jr. |
| 160,000 |
|
| 245,003 |
|
| — |
|
| 405,003 |
| ||||
Henry McKinnell, Jr. (4) |
| 52,500 |
|
| 389,756 (5) |
|
| — |
|
| 442,256 |
| ||||
Leslie Seidman |
| 130,000 |
|
| 179,946 |
|
| — |
|
| 309,946 |
| ||||
Zig Serafin (4) |
| 52,500 |
|
| 179,813 |
|
| — |
|
| 232,313 |
| ||||
Bruce Van Saun |
| 105,000 |
|
| 179,946 |
|
| — |
|
| 284,946 |
|
(1) | The Company’s non-management directors received an annual cash retainer of |
A non-management director may elect to defer receipt of all or a portion of his or her annual cash retainer until after termination of service on the Company’s |
(2) | On February 22, 2021, all then non-management directors, except Mr. McDaniel, received a grant of approximately $180,000 worth of RSUs issued from the 1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan (the “1998 Directors Plan”) which was equal to 650 RSUs. Also on February 22, 2021, Mr. McDaniel received a grant of approximately $245,000 worth of RSUs issued from the 1998 Directors Plan that was equal to 885 RSUs. The Compensation & Human Resources Committee authorized these RSU grants on February 8, 2021, and the grants were effective on February 22, 2021, the fifth trading day following the date of the public |
None of
|
24 | MOODY’S 2022 PROXY STATEMENT |
outstanding, including any accrued dividend equivalents, as of December 31, 2021 for each individual who served as a non-management director of the Company during 2021 was as follows: |
Name | Number of Shares Underlying Options | Number of Shares of Unvested RSUs | ||||||
Basil Anderson (a) | — | 0 | ||||||
Jorge Bermudez (b) | — | 650 | ||||||
Thérèse Esperdy | — | 655 | ||||||
Vincent Forlenza | — | 655 | ||||||
Kathryn Hill (b) | — | 655 | ||||||
Lloyd W. Howell, Jr. | — | 614 | ||||||
Raymond W. McDaniel, Jr. | — | 891 | ||||||
Henry McKinnell, Jr. (a) | — | 0 | ||||||
Leslie Seidman (b) | — | 650 | ||||||
Zig Serafin | — | 480 | ||||||
Bruce Van Saun | — | 655 |
(a) | Messrs. Anderson and McKinnell did not stand for re-election at the Company’s 2021 annual meeting of stockholders and each ceased to be a director on April 20, 2021. The Compensation & Human Resources Committee |
(b) | Mr. Bermudez, Ms Hill and Ms Seidman have not elected to defer any RSU awards and receive accrued cash dividends upon vesting of their RSUs. |
(3) | Perquisites and other personal benefits provided to each individual who served as a non-management director in 2021 were, in the aggregate, less than $10,000 per director. Each non-management director is reimbursed for travel, meals and hotel expenses incurred in connection with attending meetings of the Company’s Board of Directors or its committees. For the meetings held at the Company’s executive offices, the Company pays for travel for each non-management director and one guest of each director, as well as for their accommodations, meals, Company-arranged activities and other incidental expenses. |
(4) | Messrs. Anderson and McKinnell did not stand for re-election at the Company’s 2021 annual meeting of stockholders and each ceased to |
(5) | As permitted by the terms of the applicable grant agreement, the Board accelerated the vesting of unvested RSUs held by Messrs. Anderson and McKinnell upon their retirement. The incremental fair value of outstanding RSUs of Messrs. Anderson and McKinnell as of the modification date is included in the stock awards column in addition to the full grant date fair value of these awards as required by SEC disclosure rules. Neither Mr. Anderson nor Mr. McKinnell realized such reported value upon settlement of their respective awards. |
MOODY’S 2022 PROXY STATEMENT | 25 |
STOCK OWNERSHIP GUIDELINES FOR NON-MANAGEMENT DIRECTORS
Moody’s has adopted stock ownership guidelines for its executives, including the named executive officers and its non-management directors, encouraging them to acquire and maintain a meaningful stake in the Company. Moody’s believes that these guidelines encourage its executive officers and non-management directors to act as owners, thereby better aligning their interests with those of the Company’s stockholders.
The guidelines are intended to ensure an ownership level sufficient to assure stockholders of each director’s commitment to value creation, while satisfying an individual’s need for portfolio diversification.
Non-management directors are expected, within five years, to acquire and hold shares of the Company’s Common Stock equal in value to five times the annual cash retainer.
Restricted shares, RSUs and shares owned by immediate family members or through the Company’s tax-qualified savings and retirement plans count toward satisfying the guidelines.
Stock options, whether vested or unvested, and unearned performance shares do not count toward satisfying the guidelines.
As of December 31, 2021, each of the directors serving on that date was in compliance with the guidelines.
1998 MOODY’S CORPORATION NON-EMPLOYEE DIRECTORS’ STOCK INCENTIVE PLAN
The 1998 Directors Plan includes an annual grant limit on awards to individual directors, which is not to exceed “the lesser of 20,000 shares or shares with a fair market value of $400,000.” As disclosed in the Compensation of Directors table above, the fair market value of director grants have historically been below this amount.
26 | MOODY’S 2022 PROXY STATEMENT |
What is being voted on | Election of ten director nominees to the Board. | |
Board Recommendation | The Board of Directors recommends a vote FOR the election of each of the director nominees. |
The Board of Directors has nominated Jorge A. Bermudez, Thérèse Esperdy, Robert Fauber, Vincent A. Forlenza, Kathryn M. Hill, Lloyd W. Howell, Jr., Raymond W. McDaniel, Jr., Leslie F. Seidman, Zig Serafin and Bruce Van Saun, each for a one-year term expiring in 2023. If elected, the nominees will hold office until each of their terms expires and until a successor is elected and qualified. All of the nominees are currently members of the Board of Directors. In addition, the director nominees were previously elected by the stockholders with the exception of Mr. Serafin, who was recommended by a third-party search firm and newly elected to join the Board effective July 14, 2021. The Governance & Nominating Committee evaluates the qualifications and skills of other potential candidates in light of the Board’s current composition and consideration of the Company’s current and future business and operations. The Company expects the nominees for election as director to be able to serve if elected. If a nominee is unable to serve, proxies may be voted for the election of such other person for director as the Board may recommend in the place of such nominee or just for the remaining nominees, leaving a vacancy. Alternatively, the Board may reduce the size of the Board.
QUALIFICATIONS AND SKILLS OF DIRECTORS
The Board believes that the Board, as a whole, should possess a combination of skills, professional experience and diversity of backgrounds necessary to oversee the Company’s business. In addition, the Board believes that there are certain attributes that every director should possess, as reflected in the Board’s membership criteria. Accordingly, the Board and the Governance & Nominating Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future business and operations.
The Governance & Nominating Committee is responsible for developing and recommending Board membership criteria to the Board for approval. The criteria, which are set forth in the Company’s Corporate Governance Principles, include the candidate’s:
business experience,
qualifications, attributes and skills relevant to the management and oversight of the Company’s business,
independence,
the ability to represent diverse stockholder interests,
judgment and integrity,
the ability to commit sufficient time and attention to Board activities, and
the absence of any potential conflicts with the Company’s business and interests.
In addition, the Board and the Governance & Nominating Committee annually evaluate the composition of the Board to assess whether the skills, experience, characteristics and other criteria established by the Board are currently represented on the Board, and to assess the criteria that may be needed in the future, given the Company’s current situation and strategic plans. The Board and the Governance & Nominating Committee seek a diversity of occupational and personal backgrounds on the Board, including diversity with respect to demographics such as gender, race, ethnic and national
MOODY’S 2022 PROXY STATEMENT | 27 |
background, geography, and age in order to obtain a range of viewpoints and perspectives. As part of the search process for each new director, the Governance & Nominating Committee includes women and minorities in the pool of candidates (and instructs any search firm the Committee engages to do so). The Committee also considers the special requirements of Moody’s Investors Service and its role in the securities markets. As an example, the Committee has not sought out individuals who by profession actively manage securities portfolios as the Committee determined that such individuals could encounter conflicts of interests or give rise to the appearance of conflicts.
This annual evaluation of the Board’s composition enables the Board and the Governance & Nominating Committee to update the skills and experience they seek in the Board as a whole, and in individual directors, as the Company’s needs evolve and change over time, and to assess the effectiveness of efforts at promoting diversity. In identifying director candidates from time to time, the Board and the Governance & Nominating Committee may identify specific skills and experience that they believe the Company should seek in order to constitute a balanced and effective board. Recent search for potential Board candidates has focused on candidates with information, technology and cyber-related background.
In addition to a diversity of backgrounds, the Board believes it is important to have diversity of tenures represented on the Board. The Company’s director nominees have varied tenure that the Board believes facilitates and ensures effective oversight by balancing fresh perspectives and in-depth experience and knowledge about the Company.
In considering and nominating directors for election to the Board, the Board and the Governance & Nominating Committee have considered a variety of factors. These include the nominee’s independence, financial literacy, personal and professional accomplishments, experience in light of the needs of the Company and, for incumbent directors, past performance on the Board. In 2021, the Board retained a third-party search firm to assist the Governance & Nominating Committee in identifying and assessing potential Board candidates, based on the variety of factors and criteria considered by the Board. With respect to the Company’s director nominees standing for election, their biography as of the date of this Proxy Statement as well as their skills and qualifications that support their service on the Board are set forth below.
The Board of Directors recommends a vote FOR the election as directors of each of the nominees listed below.
JORGE A. BERMUDEZ
Director since April 2011
Jorge A. Bermudez, age 70, is a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. He served as Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008. Before serving as Chief Risk Officer, Mr. Bermudez was Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007. He served as Senior Advisor, Citigroup International from 2004 to 2006, as Chief Executive Officer of Citigroup Latin America from 2002 to 2004, Chief Executive Officer, eBusiness, Global Cash Management and Trade from 1998 to 2002 and Head of Citibank Corporate and Investment Bank, South America from 1996 to
28 | MOODY’S 2022 PROXY STATEMENT |
1998. Mr. Bermudez joined Citigroup in 1975 and held leadership positions in other divisions, including equity investments, credit policy and corporate banking from 1984 to 1996. Mr. Bermudez currently is the Chairman of the Smart Grid Center Board at Texas A&M University, and also serves on the Board of Directors of AB Mutual Funds, overseeing approximately 70 funds within the mutual fund complex (January 2020-present). He is also a member of the Bretton Woods Committee (2022-present). He served as a director of Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, the Association of Former Students, Texas A&M University from 2005 to 2012, the American Institute of Architects for the entirety of 2015, and the Electric Reliability Council of Texas from 2010 to 2016. He was a member of the Texas A&M Foundation Board of Trustees (2014-2021). He also serves as a director of the Community Foundation of Brazos Valley where he served as Chairman from July 2013 to June 2014 and currently serves as the chairman of the Investment Committee.
Mr. Bermudez brings a history of executive experience at a major international financial services company. As the head of risk for a major global financial institution, he was involved in the debt restructuring of various sovereigns around the world. He also managed a global business with a presence in over 100 countries. As a result, Mr. Bermudez brings a deep understanding of credit risk and years of financial expertise, as well as risk management experience, to the Board.
THÉRÈSE ESPERDY
Director since March 2019
Thérèse Esperdy, age 61, is a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. She held various executive roles at JPMorgan Chase & Co. (“JPMorgan”) from 1997 through 2015, including Global Chairman of Financial Institutions Group, Co-Head of Banking, Asia Pacific, and Head of Global Debt Capital Markets. Prior to her time at JPMorgan, Ms Esperdy started her banking career at Lehman Brothers. Ms Esperdy currently serves as the Non-Executive Chairman of Imperial Brands PLC (January 2020-present), where she was a Non-Executive Director and then Senior Independent Director (July 2016-December 2019). She also serves as the Senior Independent Director at National Grid plc (March 2014-present).
Ms Esperdy’s extensive experience in global investment banking and financial markets provides her with strategic and financial expertise that is critical to overseeing the Company’s strategies. As a senior executive at JPMorgan, she played key roles in managing JPMorgan’s Asia and capital markets businesses through challenging financial climates. Her experiences and expertise enhance the Board’s ability to oversee the Company’s global operations and effectively manage risk.
ROBERT FAUBER
Director since October 2020
Robert Fauber, age 51, has served as the Company’s President and Chief Executive Officer since January 2021. Mr. Fauber joined the Board of Directors in October 2020 and he currently serves on the Executive Committee of the Board of Directors. Prior to serving as CEO, Mr. Fauber served as Chief Operating Officer from November 2019 to December 2020, as President of Moody’s Investors Service, Inc. from June 2016 to October 2019, as Senior Vice President—Corporate & Commercial Development of Moody’s Corporation from April 2014 to May 2016, and was Head of the MIS Commercial Group from January 2013 to May 2016. From April 2009 through April 2014, he served as Senior Vice President—Corporate Development of Moody’s Corporation. Mr. Fauber served as Vice President—Corporate Development from September 2005 to April 2009. Prior to joining Moody’s,
MOODY’S 2022 PROXY STATEMENT | 29 |
Mr. Fauber served in several roles at Citigroup and its investment banking subsidiary Salomon Smith Barney from 1999 to 2005. From 1992 to 1996, Mr. Fauber worked at NationsBank (now Bank of America) in the middle market commercial banking group.
Mr. Fauber, who is both President and Chief Executive Officer of the Company, brings to the Board a wealth of experience in the financial services industry as well as an in-depth understanding of the operational and the strategic considerations for the Company.
VINCENT A. FORLENZA
Director since April 2018
Vincent A. Forlenza, age 68, is the Lead Independent Director, Chairman of the Governance & Nominating Committee, and a member of the Audit, Compensation & Human Resources and Executive Committees of the Board of Directors. He served as a director of Becton, Dickinson and Company (“BD”), a global medical technology company, from 2011 to April 2021 and as the Chairman of its board from 2012 to April 2021. Mr. Forlenza served as BD’s Chief Executive Officer from 2011 to January 2020 and President from 2009 to April 2017. Mr. Forlenza served as Chief Operating Officer from July 2010 to October 2011. Mr. Forlenza joined BD in 1980 and served in a number of different capacities, including strategic planning, business development, research and development, and general management in each of BD’s segments and in overseas roles. He is the chairman of the Board of Trustees of The Valley Health System and a member of the Board of Directors of the Quest Autism Foundation. He currently serves as a member of the Board of Trustees of Lehigh University since rejoining the Board in July 2020 after previously serving from 2011 to 2017. Mr. Forlenza has also served since August 2021 as a director of MARABio Systems Inc., a startup company developing a diagnostic test for autism. Mr. Forlenza previously served on the board of the Advanced Medical Technology Association (AdvaMed), an international medical technology trade organization.
Mr. Forlenza served as the chief executive officer of a public, global medical technology company for approximately nine years. He also served as chairman of that company’s board for approximately eight years. Prior to becoming chief executive officer, he was the chief operating officer and held various additional roles. He has experience leading a large global business in a regulated industry, including significant experience in large M&A transactions. He additionally brings experience in areas such as strategic planning, business development and new product development. His service as a director also contributes to his focus on corporate governance matters.
KATHRYN M. HILL
Director since October 2011
Kathryn M. Hill, age 65, is Chairman of the Compensation & Human Resources Committee and is a member of the Executive, Audit and Governance & Nominating Committees of the Board of Directors. Ms Hill has over 30 years of experience in business management and leading engineering and operations organizations. Ms Hill served in a number of positions at Cisco Systems, Inc. from 1997 to 2013, including, among others, Executive Advisor from 2011 to 2013, Senior Vice President, Development Strategy and Operations from 2009 to 2011, Senior Vice President, Access Networking and Services Group from 2008 to 2009 and Senior Vice President, Ethernet Systems and Wireless Technology Group from 2005 to 2008. Cisco designs, manufactures and sells Internet Protocol (IP)-based networking and other products related to the communications and information technology industry and provides services associated with these products. Prior to Cisco, Ms Hill had a number of engineering roles at various technology companies. Ms Hill currently serves as a director of NetApp, Inc. (September 2013-present) and Celanese Corporation (July 2015-present).
30 | MOODY’S 2022 PROXY STATEMENT |
Ms Hill has significant experience in business management and leading engineering and operations organizations. Her various executive roles at Cisco Systems, Inc. allow her to bring extensive leadership experience and a strong background in information technology and business operations to the Board.
LLOYD W. HOWELL, JR.
Director since March 2021
Lloyd W. Howell, Jr., age 55, is a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. He has served as the Executive Vice President, Chief Financial Officer and Treasurer of Booz Allen Hamilton Holding Corporation (“BAH”), a business management consulting company, since 2016. He served as the Executive Group President, Group Leader, Civil and Commercial Group, from 2013 to 2016, as Executive Vice President, Client Services Officer, from 2009 to 2013, and as Vice President, Strategy and Organization, from 2000 to 2009. Prior to that, Mr. Howell held a variety of leadership positions since originally joining BAH in 1988. Mr. Howell previously served as a director of Integra Lifesciences Holdings Corporation, a medical devices company (2013-February 2021). He is a Trustee at the University of Pennsylvania and a member of their board of overseers of the School of Engineering and Applied Science. He is also a member of the Washington Economics Club.
Mr. Howell serves as a chief financial officer and treasurer of a major business management consulting firm, which allows him to bring an extensive executive leadership experience and business management expertise that span over a number of industries and both domestic and international markets. He also has a strong background in information systems and cyber-related matters.
RAYMOND W. MCDANIEL, JR.
Director since April 2003
Raymond W. McDaniel, Jr., age 64, has been the Chairman of the Board since January 2021. He currently serves on the Executive Committee of the Board of Directors. He previously served as the Company’s President and Chief Executive Officer from April 2012 to December 2020, and served as the Chairman and Chief Executive Officer from April 2005 until April 2012. Mr. McDaniel served as the Company’s President from October 2004 until April 2005 and the Company’s Chief Operating Officer from January 2004 until April 2005. He served as Chief Executive Officer of Moody’s Investors Service from October 2007 to December 2020. He held the additional titles of President from November 2001 to August 2007 and December 2008 to November 2010 and Chairman from October 2007 until June 2015. Mr. McDaniel served as the Company’s Executive Vice President from April 2003 to January 2004, and as Senior Vice President, Global Ratings and Research from November 2000 until April 2003. He served as Senior Managing Director, Global Ratings and Research, of Moody’s Investors Service from November 2000 until November 2001 and as Managing Director, International from 1996 to November 2000. Mr. McDaniel currently is a director of John Wiley & Sons, Inc. (2005-present) and a member of the Board of Trustees of Muhlenberg College (2015-present).
Mr. McDaniel began his career at the Company serving as a ratings analyst and served in numerous capacities at the Company over the past three decades. As a result, he brings to the Board a deep understanding of the Company’s business and operations as well as a historical perspective on the Company’s strategy. In addition, his service since 2005 as a director of John Wiley & Sons, Inc., which develops, publishes and sells products in print and electronic media for the educational, professional, scientific, technical, medical and consumer markets worldwide, has provided him with perspective on public company governance issues.
MOODY’S 2022 PROXY STATEMENT | 31 |
LESLIE F. SEIDMAN
Director since December 2013
Leslie F. Seidman, age 59, is Chairman of the Audit Committee and is a member of the Executive, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. Ms Seidman has over 30 years of experience in the accounting profession, serving as a member of the Financial Accounting Standards Board (“FASB”) from 2003-2013, and as Chairman for approximately the last three years of her term. During her tenure, the FASB established numerous accounting standards relating to financial instruments, including securitizations, derivatives and credit losses and worked with regulators and policy makers in the U.S., and in other major capital markets to develop consistent accounting standards. Previously, Ms Seidman was the founder and managing member of a financial reporting consulting firm that served global financial institutions, law firms and accounting firms. From 1987 to 1996, Ms Seidman served as Vice President, Accounting Policy and in other roles at J.P. Morgan & Company, Inc. (now JPMorgan Chase) and from 1984 to 1987, Ms Seidman served as an auditor for Arthur Young & Co. (now EY). Ms Seidman previously served as a Public Governor of the Financial Industry Regulatory Authority (2014-2019). Ms Seidman currently serves as a director of General Electric (2018-present), where she has served as the Audit Committee Chair since April 2019, and is also an advisor to Idaciti, Inc., a start-up fintech company (2017-present).
Ms Seidman brings regulatory and financial expertise to the Board. She served as a Public Governor of the Financial Industry Regulatory Authority (FINRA). Her experience as the Chairman of the Financial Accounting Standards Board, executive at a major bank and auditor for a major accounting firm allows her to bring to the Board significant knowledge of global accounting and financial reporting matters in addition to regulatory and senior management experience. In addition, she has previously worked as a CPA and is certified in cybersecurity oversight (2018) and ESG oversight (GCB.D, 2021).
ZIG SERAFIN
Director since July 2021
Zig Serafin, age 48, was appointed a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors, effective July 14, 2021. He has served as the Chief Executive Officer of Qualtrics International Inc. (“Qualtrics”), the leading experience management software provider, since July 2020 and prior to that as President from January 2019 to July 2020. Mr. Serafin joined Qualtrics in October 2016 as Chief Operating Officer. Prior to that, from July 2009 to October 2016, Mr. Serafin served as a Corporate Vice President at Microsoft Corporation, a multi-national technology company. From September 2009 to October 2012, Mr. Serafin served as General Manager at Tellme Networks, Inc., a telephone-based applications provider, following its acquisition by Microsoft Corporation. He currently serves as a member of Qualtrics board of directors.
Having served as a senior executive of major technology and software companies, Mr. Serafin brings extensive digital and technology expertise as well as executive management experience. His substantive expertise extends to enterprise collaboration services, artificial intelligence and user experience.
32 | MOODY’S 2022 PROXY STATEMENT |
BRUCE VAN SAUN
Director since March 2016
Bruce Van Saun, age 64, is a member of the Audit, Governance & Nominating and Compensation & Human Resources Committees of the Board of Directors. He has served as Chairman and Chief Executive Officer of Citizens Financial Group, Inc. (“Citizens”), a large regional bank, since October 2013. He joined Citizens from The Royal Bank of Scotland Group plc (“RBS”), a global banking and financial services group. He led Citizens to a successful initial public offering in September 2014, and full independence from RBS in October 2015. At RBS, Mr. Van Saun served as Group Finance Director and as an executive director on the RBS board from 2009 to 2013. Prior to that, Mr. Van Saun held a number of senior positions with Bank of New York and later Bank of New York Mellon over an 11-year period. As Vice Chairman and Chief Financial Officer, he was actively involved in the strategic transformation of Bank of New York from a diversified regional bank into a focused global securities servicer and asset manager. Earlier in his more than 30-year financial services career, he held senior positions with Deutsche Bank, Wasserstein Perella Group and Kidder Peabody & Co. Mr. Van Saun has served on a number of boards in both the U.S. and the U.K. He is a current member of The Clearing House supervisory board and also serves on the board of the Federal Reserve Bank of Boston. He also serves as the Chairman of the Audit Committee of The Bank Policy Institute. He has previously served on the boards of The Royal Bank of Scotland Group plc and National Westminster Bank, Plc, each an RBS affiliate, from October 2009 to October 2013. He also served on the boards of ConvergEx Inc. from May 2007 to October 2013, Direct Line Insurance Group plc from April 2012 to October 2013 and WorldPay (Ship Midco Limited) from July 2011 to September 2013, and on the franchise board of Lloyd’s of London from September 2012 to May 2016.
Mr. Van Saun currently serves as the chief executive officer and chairman of a U.S. bank. He has extensive executive experience, having formerly held several additional senior management positions at banks. As a result of holding these positions, Mr. Van Saun brings financial expertise, management experience and experience managing a business in a highly regulated industry both in the U.S. and in Europe. He has also served as a director of several companies, contributing to his appreciation of corporate governance matters.
MOODY’S 2022 PROXY STATEMENT | 33 |
ITEM 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
What is being voted on | Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting | |
Board Recommendation | The Board of Directors recommends a vote FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for |
The Audit Committee evaluates the selection of the Company’s independent auditor each year, and has appointed KPMG LLP as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company for the year ending December 31, 2022. KPMG LLP audited the consolidated financial statements of the Company for the year ended December 31, 2021. In determining whether to reappoint KPMG as the Company’s independent auditor, the Audit Committee took into consideration a number of factors, including: KPMG’s performance on prior audits, and the quality and efficiency of the services provided by KPMG; an assessment of the firm’s professional qualifications, resources and expertise; KPMG’s knowledge of the Company’s business and industry; the quality of the Audit Committee’s ongoing communications with KPMG and of the firm’s relationship with the Audit Committee and Company management; KPMG’s independence; the appropriateness of KPMG’s fees; the length of time the firm has served in this role; the impact of changing auditors; and data on audit quality and performance, including recent PCAOB reports on KPMG LLP and peer firms. Considered together, these factors enable the Audit Committee to evaluate whether the selection of KPMG LLP as the Company’s independent auditor, and the retention of KPMG LLP to perform other services, will contribute to and enhance audit quality. Based on its evaluation, the Audit Committee believes that the continued retention of KPMG LLP to serve as the Company’s independent registered public accounting firm is in the best interest of our stockholders.
The Audit Committee has requested the Board of Directors to submit the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2022 to stockholders for ratification as a matter of good corporate governance. If the appointment of KPMG LLP is not ratified by stockholders, the Audit Committee will re-evaluate its selection and will determine whether to maintain KPMG LLP as the Company’s independent registered public accounting firm or to appoint another independent registered public accounting firm.
A representative of KPMG LLP is expected to be present at the Annual Meeting. Such representative will have the opportunity to make a statement if he so desires and is expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2022.
34 | MOODY’S 2022 PROXY STATEMENT |
PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT FEES AND SERVICES
Audit Fees
The aggregate fees for professional services rendered for (i) the integrated audit of the Company’s annual financial statements for the years ended December 31, 2021 and 2020, (ii) the review of the financial statements included in the Company’s Reports on Forms 10-Q and 8-K, and (iii) statutory audits of subsidiaries, were approximately $6.7 million and $5.9 million in 2021 and 2020, respectively. These fees included amounts accrued but not billed of approximately $3.1 million and $2.5 million in each of the years ended December 31, 2021 and 2020, respectively.
AUDIT-RELATED FEES
The aggregate fees for audit-related services rendered to the Company were approximately $0.2 million and $0.2 million in the years ended December 31, 2021 and December 31, 2020, respectively. Such services included employee benefit plan audits.
TAX FEES
The aggregate fees billed for professional services rendered for tax services rendered by the auditors for the years ended December 31, 2021 and 2020 were approximately $0.2 million and $0, respectively.
ALL OTHER FEES
The aggregate fees billed for all other services rendered to the Company by KPMG LLP for the years ended December 31, 2021 and 2020 were approximately $0 and $0, respectively.
MOODY’S 2022 PROXY STATEMENT | 35 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the number of shares of Common Stock beneficially owned as of the dates indicated below by (i) each director and nominee for director of the Company, (ii) each Named Executive Officer (as defined below), (iii) all directors and executive officers of the Company as a group, and (iv) each person who is known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock (the “Company’s 5% Owners”). Except as noted below, stock ownership information is based on (a) the number of shares of Common Stock beneficially owned by directors and executive officers as of December 31, 2021 (based on information they supplied to the Company), calculated in accordance with SEC rules, and (b) the number of shares of Common Stock held by the Company’s 5% Owners, based on information filed with the SEC by the Company’s 5% Owners. Unless otherwise indicated and except for the interests of individuals’ spouses, the stockholders listed below have sole voting and investment power with respect to the shares indicated as owned by them. Percentages are based upon the number of shares of Common Stock outstanding on December 31, 2021, and, where applicable, the number of shares of Common Stock that the indicated beneficial owner had a right to acquire within 60 days of such date. The table also sets forth ownership information concerning “Stock Units,” the value of which is measured by the price of the Common Stock. Stock units do not confer voting rights and are not considered “beneficially owned” shares under SEC rules.
Name | Shares Beneficially Owned (1) | Number of Shares Subject to Options Which Are or Become Exercisable Within 60 Days of December 31 (2) | Number of RSUs That Vest Within 60 Days of December 31 Stock Units and Dividend Equivalents (3) | Total Beneficial Ownership | Stock Units (4) | Percentage of Shares Outstanding (5) | ||||||||||||||||||||||||||||||
Jorge A. Bermudez | 10,800 | 0 | 650 | 11,450 | * | |||||||||||||||||||||||||||||||
Thérèse Esperdy | 1,719 | 0 | 655 | 2,374 | * | |||||||||||||||||||||||||||||||
Robert Fauber | 43,622 | 62,361 | 2,614 | 108,840 | * | |||||||||||||||||||||||||||||||
Vincent A. Forlenza | 4,371 | 0 | 655 | 5,026 | 471 | * | ||||||||||||||||||||||||||||||
John J. Goggins | 9,319 | 18,578 | 1,104 | 29,001 | * | |||||||||||||||||||||||||||||||
Kathryn M. Hill | 16,706 | 0 | 655 | 17,361 | * | |||||||||||||||||||||||||||||||
Lloyd W. Howell, Jr. | 0 | 0 | 0 | 0 | * | |||||||||||||||||||||||||||||||
Mark Kaye | 79 | 6,777 | 1,645 | 8,501 | * | |||||||||||||||||||||||||||||||
Raymond W. McDaniel, Jr. | 216,595 | (6 | ) | 267,641 | 891 | 485,127 | * | |||||||||||||||||||||||||||||
Leslie F. Seidman | 8,530 | 0 | 650 | 9,180 | * | |||||||||||||||||||||||||||||||
Zig Serafin | 0 | 0 | 0 | 0 | * | |||||||||||||||||||||||||||||||
Stephen Tulenko | 3,046 | 4,355 | 1,073 | 8,474 | * | |||||||||||||||||||||||||||||||
Bruce Van Saun | 6,189 | 0 | 655 | 6,844 | * | |||||||||||||||||||||||||||||||
Michael West | 3,960 | 4,896 | 956 | 9,812 | * | |||||||||||||||||||||||||||||||
All current directors and executive officers as a group (16 people) | 328,966 | 368,695 | 14,270 | 712,174 | 471 | * | ||||||||||||||||||||||||||||||
Berkshire Hathaway, Inc. | 24,669,778 | (7 | )(8) | 13.3% | ||||||||||||||||||||||||||||||||
Warren E. Buffett, National Indemnity Company, GEICO Corporation, Government Employees Insurance Company, 3555 Farnam Street, Omaha, Nebraska 68131 | ||||||||||||||||||||||||||||||||||||
The Vanguard Group | 13,521,137 | (9 | ) | 7.3% | ||||||||||||||||||||||||||||||||
100 Vanguard Blvd., Malvern, Pennsylvania 19355 | ||||||||||||||||||||||||||||||||||||
BlackRock Inc. | 11,818,749 | (10 | ) | 6.4% | ||||||||||||||||||||||||||||||||
55 East 52nd Street, New York, New York 10055
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* | Represents less than 1% of the |
(1) | Includes all shares held directly, including those that have been deferred. |
(2) | Options vesting within 60 days of December 31, |
36 | MOODY’S 2022 PROXY STATEMENT |
(3) | Consists of: (i) RSUs that have been granted to members of management that vest within 60 days of December 31, 2021; and |
(4) | Consists of stock units (payable to non-management directors after retirement), the |
(5) | Percentages are based upon the |
(6) | This amount includes 2,000 shares of Common Stock owned by Mr. McDaniel’s spouse and shares held in family trusts. |
(7) | As set forth in Amendment No. 3 to the
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(8) | This address is listed in Amendment No. 3 to the |
(9) | As set forth in Amendment No. 9 to the Schedule 13G filed with the SEC on February 10, 2022 by The Vanguard Group. The Vanguard Group had sole voting power with respect to 0 shares, shared voting power with respect to 276,484 shares, sole dispositive power with respect to 12,847,254 shares and shared dispositive power with respect to 673,883 of their 13,521,137 shares as of December 31, |
(10) | As set forth in Amendment No. 8 to the Schedule 13G filed with the SEC on February 1, 2022 by BlackRock Inc. BlackRock Inc. had sole voting power with respect to 10,042,441 shares and
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MOODY’S 2022 PROXY STATEMENT | 37 |
ITEM 3—ADVISORY RESOLUTION APPROVING EXECUTIVE COMPENSATION
What is being voted on |
The Board of Directors recommends a vote FOR the advisory resolution approving executive compensation.
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We are asking stockholders to vote on an advisory resolution approving the compensation of the Company’s executives who are named in the Summary Compensation Table that appears on page 60 (referred to as the “Named Executive Officers” or “NEOs”) of this Proxy Statement. As described in the Compensation Discussion and Analysis section of this Proxy Statement, the goal of the Compensation & Human Resources Committee in setting executive compensation is to provide a competitive total compensation package that assists in the retention of the Company’s executives and motivates them to perform at a superior level while encouraging behavior that is in the long-term best interests of the Company and its stockholders. Consistent with this philosophy, a significant portion of the total compensation opportunity for each of Moody’s executives is performance-based and ultimately dependent upon the Company’s achievement of specified goals that are both financial and operating (non-financial) in nature and aligned with stockholder value creation.
We urge stockholders to read the CD&A beginning on page 39 of this Proxy Statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative, beginning on page 60, which provide detailed information on the compensation of our NEOs for 2021. The Committee and the Board of Directors believe that the policies and procedures articulated in the CD&A are effective in achieving our goals and that the compensation of our NEOs reported in this Proxy Statement has supported and contributed to the Company’s success.
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, the Board is asking stockholders to vote at the Annual Meeting on the following advisory resolution approving executive compensation:
RESOLVED, that the stockholders of Moody’s Corporation (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s 2022 Annual Meeting of Stockholders.
This advisory resolution, commonly referred to as a say-on-pay resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation & Human Resources Committee will review and consider the voting results when evaluating the Company’s executive compensation program.
After consideration of the vote of stockholders at the Company’s 2017 annual meeting of stockholders on the frequency of future say-on-pay resolutions and other factors, the Board determined to hold a vote on an advisory resolution approving executive compensation annually, although it may determine to vary this practice based on factors such as discussions with stockholders. Accordingly, unless the Board modifies its policy on the frequency of future say-on-pay advisory votes, the next say-on-pay vote after the Annual Meeting will be held at the Company’s 2023 annual meeting of stockholders.
The Board of Directors recommends a vote FOR the advisory resolution approving executive compensation.
Name | Aggregate Amount of Shares Beneficially Owned(1) | Stock Units(2) | Percentage of Shares Outstanding(3) | |||||||||
Mark E. Almeida | 348,189 | * | ||||||||||
Basil L. Anderson | 40,791 | 11,919 | * | |||||||||
Jorge A. Bermudez | 16,191 | * | ||||||||||
Darrell Duffie | 21,336 | * | ||||||||||
Robert Fauber | 75,921 | * | ||||||||||
Vincent A. Forlenza | — | * | ||||||||||
John J. Goggins | 212,959 | * | ||||||||||
Kathryn M. Hill | 13,952 | * | ||||||||||
Linda S. Huber | 109,490 | * | ||||||||||
Ewald Kist | 27,104 | * | ||||||||||
Raymond W. McDaniel, Jr. | 866,640 | (4) | * | |||||||||
Henry A. McKinnell, Jr. | 83,329 | 1,827 | * | |||||||||
Leslie F. Seidman | 7,036 | * | ||||||||||
Bruce Van Saun | 3,255 | * | ||||||||||
Gerrit Zalm | — | * | ||||||||||
All current directors and executive officers as a group (17 persons) | 1,915,721 | 13,746 | 1.0 | % | ||||||||
Berkshire Hathaway, Inc. | 24,669,778 | (5)(6) | 12.9 | % | ||||||||
Warren E. Buffett, National Indemnity Company, GEICO Corporation, Government Employees Insurance Company, 3555 Farnam Street, Omaha, Nebraska 68131 | ||||||||||||
The Vanguard Group | 16,533,894 | (7) | 8.7 | % | ||||||||
100 Vanguard Blvd., Malvern, Pennsylvania 19355 | ||||||||||||
BlackRock Inc. | 10,557,911 | (8) | 5.5 | % | ||||||||
55 East 52nd Street, New York, New York 10055 |
38 | MOODY’S 2022 PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS
Moody’s executive compensation programs are designed to foster and maintain a strong, capable, experienced and motivated executive team with the ability to manage the business during challenging times and to change as market practices warrant by aligning compensation with business performance and the interests of our stockholders. This discussion and analysis provides a guide to Moody’s executive compensation programs and explains the decisions of the Compensation & Human Resources Committee (in this discussion, also referred to as the “Committee”) regarding compensation reported for 2021 for Robert Fauber, the Chief Executive Officer (referred to as the “CEO”), and the other executive officers named in the Summary Compensation Table on page 60 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10% of a registered class of the Company’s equity securities to file with the SEC reports on Forms 3, 4 and 5 concerning their ownership of, and transactions in, the Common Stock and other equity securities of the Company. As a practical matter, the Company assists its directors and executives by monitoring transactions, completing and filing reports on their behalf.
Based solely on the Company’s review of copies of such reports furnished to the Company and written representations that no other reports are required, the Company believes that all of its executive officers, directors and thosegreater-than-10% stockholders that filed any reports for the year ended December 31, 2017 reported all transactions on a timely basis.
COMPENSATION DISCUSSION AND ANALYSIS
Moody’s executive compensation programs are designed to foster and maintain a strong, capable, experienced and motivated executive team with the ability to manage the business during challenging times and to change as market practices warrant by aligning compensation with business performance and the interests of our stockholders. This discussion and analysis provides a guide to Moody’s executive compensation programs and explains the decisions of the Compensation & Human Resources Committee (the “Committee”) regarding compensation reported for 2017 for Raymond W. McDaniel, Jr., the Chief Executive Officer (referred to as the “CEO”), and the other executive officers named in the Summary Compensation Table on page 52 (together with the CEO, referred to as the “Named Executive Officers” or “NEOs”).
The Company achieved strong results for
2021 financial performance measures for the Company include:
• 2021 revenue of $6.2 billion, up 16% from 2020;
• 2021 GAAP earnings per share of $11.78, up 25% from 2020; 2021 adjusted earnings per share of $12.29, up 21% from 2020;*
• 2021 operating income of $2.8 billion, up 19% from 2020; 2021 adjusted operating income was $3.1 billion, up 16% from 2020. Adjusted operating income excludes the impact of depreciation and amortization, restructuring charges/adjustments, and a loss pursuant to the divestiture of Moody’s Analytics Knowledge Services;* and
• achievement of 113% of the Company’s three-year profitability performance target. These operating and financial performance achievements formed the basis for the Committee’s award determinations.
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