UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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Morningstar, Inc.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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No fee required.
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to
which transaction applies:
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Aggregate number of securities to
which transaction applies:
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it was
determined):
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary
materials.
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Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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Date Filed:
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Notice of 2010 Annual Meeting
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and
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Proxy Statement
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April 8,
2010
Dear
Shareholder:
We will hold
our 2010 Annual Shareholders Meeting at 9:00 a.m. local time on Tuesday, May 18,
2010 at our corporate headquarters at 22 West Washington Street in Chicago,
Illinois. We look forward to your participation, either in person or by proxy.
The agenda
for this years meeting includes the election of directors and ratification of
the appointment of our independent registered public accounting firm. The Board
of Directors recommends that you vote to elect each of the director nominees
and to ratify the appointment of our independent registered public accounting
firm. Please refer to the proxy statement for detailed information on each of
the proposals and the meeting.
Each share
of our stock that you own represents one vote. If you do not vote your shares,
you will not have a say in the important issues to be voted on at the meeting.
The election of each director nominee and the proposal to ratify the
appointment of our independent registered public accounting firm will each
require the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote.
If you have
any questions concerning the meeting or the proposals, please contact our
Investor Relations department at (312) 696-6621. For questions regarding your
stock ownership, you may contact our transfer agent, Computershare Investor
Services, LLC, through its website at www.computershare.com/contactUS or by
phone at (866) 303-0659 (within the United States and Canada) or (312) 588-4659
(outside the United States and Canada). You can view your Morningstar stock
holdings electronically and perform other transactions by enrolling in
Computershares Investor Center at www.computershare.com.
Sincerely,
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Joe Mansueto
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Chairman of the Board
and Chief Executive Officer
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Morningstar, Inc.
Notice of Annual Shareholders Meeting
To be held on May 18, 2010
Dear
Shareholder:
You are
cordially invited to attend our 2010 Annual Shareholders Meeting, which will
be held at 9:00 a.m. local time on Tuesday, May 18, 2010 at our
corporate headquarters at 22 West Washington Street, Chicago, Illinois 60602.
We are
holding the annual meeting for the following purposes:
·
To elect the director nominees identified in this proxy statement to hold
office until the next annual shareholders meeting or until their respective
successors have been elected or appointed.
·
To ratify the appointment of Ernst & Young LLP as our independent registered
public accounting firm for the current year.
·
To transact other business that may properly come before the annual meeting or
any adjournment or postponement of the meeting.
The proxy
statement, which follows this notice, fully describes these items. We have not
received notice of other matters to be presented at the annual meeting.
You may vote
at the annual meeting and any postponements or adjournments of the meeting if
you were a shareholder of record as of the close of business on March 19,
2010, the record date for the meeting. For 10 days prior to the annual meeting,
a list of shareholders entitled to vote will be available for inspection at our
corporate headquarters, 22 West Washington Street, Chicago, Illinois 60602.
To ensure
that your vote is recorded promptly, please vote as soon as possible, even if
you plan to attend the annual meeting in person. For further details, see How
do I vote? on page two.
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Richard E.
Robbins
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General
Counsel and Corporate Secretary
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Chicago,
Illinois
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April 8,
2010
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Proxy
Statement
Our Board of
Directors (the Board) solicits your proxy for the 2010 Annual Shareholders
Meeting to be held at 9:00 a.m. local time on Tuesday, May 18, 2010
at our corporate headquarters at 22 West Washington Street in Chicago, Illinois
60602 and at any postponement or adjournment of the meeting, for the purposes
set forth in the Notice of Annual Shareholders Meeting included with this
proxy statement. We made copies of this proxy statement available to
shareholders beginning on April 8, 2010.
Questions and Answers About the
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Annual
Meeting and the Proxy Materials
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Where is the
annual meeting?
We will hold
the annual meeting at 9:00 a.m. local time on Tuesday, May 18, 2010
at our corporate headquarters at 22 West Washington Street, Chicago, Illinois
60602. When you arrive in the lobby, check in at the security desk and take the
elevator directly to the seventh floor to reach the auditorium. You will need
to present a photo ID when you check in at the security desk. We will have
signs posted that direct you to the appropriate location. We will not permit
cameras or other recording devices in the auditorium.
Why did I
receive a notice in the mail regarding Internet availability of proxy materials
this year instead of a full set of proxy materials?
We are now
providing access to our proxy materials over the Internet. On April 8,
2010 we mailed a Notice of Internet Availability of Proxy Materials to our shareholders
of record and beneficial owners. The Notice explains how you may access the
proxy materials on the Internet and how you may vote your proxy. If you
received a Notice by mail and would like to receive a printed copy of our proxy
materials, you should follow the instructions for requesting printed materials
included in the Notice.
What will
shareholders vote on at the annual meeting?
Shareholders
will elect the Board to serve until our next annual meeting and be asked to
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for this year. We do not expect any other
matters to be presented at the meeting. If other matters are properly presented
for voting at the meeting, the persons named as proxies will vote in accordance
with their best judgment on those matters.
Who is entitled
to vote at the annual meeting?
Shareholders
of record as of the close of business on March 19, 2010 are entitled to
vote at the meeting. On that date, there were 48,900,251 outstanding shares of
common stock.
What is a
shareholder of record?
If your
shares are registered directly in your name with our transfer agent,
Computershare Investor Services, you are considered the shareholder of record
for those shares. As the shareholder of record, you have the right to vote your
shares.
If your
shares are held in a stock brokerage account or by a bank, or other holder of
record, you are considered the beneficial owner of shares held in street name.
Your broker, bank, or other holder of record is the shareholder of record for
those shares. As the beneficial owner, you have the right to direct your
broker, bank, or other holder of record on how to vote your shares.
Morningstar, Inc. 2010 Proxy Statement
01
How many votes
are required to elect directors and adopt proposals?
The election
of each director nominee and ratification of the appointment of Ernst &
Young as our independent registered public accounting firm each require the
affirmative vote of a majority of the shares of common stock represented in
person or by proxy at the meeting and entitled to vote. A majority of the
shares entitled to vote on a matter, whether present in person or by proxy,
will constitute a quorum for consideration of that matter at the meeting.
How many votes
am I entitled to per share?
Each share
of our stock that you own represents one vote. If you do not vote your shares,
you will not have a say in the important issues to be voted upon at the
meeting.
How do I vote?
If you are a
shareholder of record, you may vote in person at the meeting. If you do not
wish to vote in person or if you will not be attending the meeting, you may
vote by telephone, or over the Internet, by following the instructions provided
in the Notice of Internet Availability of Proxy Materials. If you requested a
printed copy of the proxy materials by mail, you may also complete, sign, and
date your proxy card and return it in the prepaid envelope that was included
with the printed materials.
If you are a
beneficial owner of shares and you wish to vote in person at the meeting, you
must obtain a legal proxy from your broker, bank, or other shareholder of
record and present it to the inspectors of election with your ballot to be able
to vote at the meeting. If you do not wish to vote in person or if you will not
be attending the meeting, you may vote by following the instructions provided
in the Notice of Internet Availability of Proxy Materials you received from the
shareholder of record of your shares. If you received a printed copy of the
proxy materials by mail, you should have received a proxy card and voting
instructions from the shareholder of record of your shares.
If you are a
shareholder of record and submit a signed proxy card but do not fill out the
voting instructions, the persons named as proxies will vote the shares
represented by your proxy as follows:
·
FOR
the election of the director
nominees listed in Proposal 1: Election of Directors.
·
FOR
the ratification of the appointment
of Ernst & Young as our independent registered public accounting firm
for the current year.
What is the
effect if I abstain from voting on a matter or my broker withholds my vote?
For the
election of directors, ratification of the appointment of Ernst &
Young as our independent registered public accounting firm, and for the purpose
of determining whether the shareholders have approved other matters,
abstentions are treated as shares that are represented and entitled to vote, so
abstaining has the same effect as a negative vote. Shares held by brokers that
do not have discretionary authority to vote on a particular proposal and that
have not received voting instructions from their customers are not counted as
being represented or entitled to vote on the proposal, which has the effect of reducing
the number of affirmative votes needed to approve the proposal.
Should I submit
a proxy even if I plan to attend the annual meeting?
To ensure
that your vote is recorded promptly, please vote as soon as possible, even if
you plan to attend the meeting in person. If you attend the meeting and are a
shareholder of record, you may also submit your vote in person, and any
previous votes that you submitted will be superseded by the vote that you cast
at the meeting.
Morningstar, Inc. 2010 Proxy Statement
02
Can I revoke my
proxy?
You may
revoke your proxy at any time prior to the completion of voting at the meeting
by voting in person at the meeting or by delivering instructions prior to the
meeting by mail to Richard Robbins, General Counsel and Corporate Secretary,
Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602. If
you are a beneficial owner, you must contact your broker, bank, or other holder
of record to revoke any prior voting instructions.
Who will bear
the cost of soliciting votes for the annual meeting?
We will bear
the expense of soliciting proxies. Our directors, officers, and other employees
may also solicit proxies personally or in writing, by telephone, e-mail, or
otherwise. They will not be compensated for soliciting proxies. We are required
to request that brokers and nominees who hold stock in their names furnish our
proxy material to the beneficial owners of the stock, and we must reimburse
those brokers and nominees for the expenses of doing so in accordance with
applicable statutory fee schedules.
Will a replay
of the annual meeting be available?
If you miss
the meeting, you can view a videotaped replay at
http://www.corporate.morningstar.com until November 30, 2010.
Morningstar, Inc. 2010 Proxy Statement
03
_____________________________________________________
Proposal
1:
Election of Directors
Our nominees
for election as directors include six independent directors, as defined in the
applicable rules for companies traded on the Nasdaq Global Select Market
(NASDAQ), and two members of our senior management team. Each director serves a
one-year term, as described below, with all directors subject to annual
election.
In December 2009,
Frank Ptak announced his intention to step down as a member of the Board at the
annual meeting on May 18, 2010. Frank is not standing for re-election at
the annual meeting. In January 2010, at the recommendation of the
Nominating and Corporate Governance Committee, the Board appointed Hugh
Zentmyer to serve on the Board.
At the
recommendation of the Nominating and Corporate Governance Committee, the Board
nominated each person listed below to serve as a director for the term
beginning at the annual meeting on May 18, 2010 and ending with the annual
meeting to be held in 2011 or until his or her successor, if any, is elected or
appointed. Unless proxy cards are otherwise marked, the persons named as
proxies will vote all proxies received
FOR
the
election of each nominee.
If any
director nominee is unable or unwilling to stand for election at the time of
the annual meeting, the persons named as proxies may vote either for a
substitute nominee designated by the present Board to fill the vacancy or for
the balance of the nominees, leaving a vacancy. Alternatively, the Board may
reduce the size of the Board. The Board believes that each nominee will be able
and willing to serve if elected as a director.
Recommendation
of the Board
The Board
recommends that you vote
FOR
the
election of each of the following nominees.
Name
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Age
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Position
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Joe Mansueto
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53
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Chairman of the Board
and Chief Executive Officer
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Don Phillips
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47
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Managing Director;
President, Fund Research; and Director
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Cheryl Francis
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56
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Director
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Steve Kaplan
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50
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Director
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Bill Lyons
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54
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Director
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Jack Noonan
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62
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Director
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Paul Sturm
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63
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Director
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Hugh Zentmyer
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63
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Director
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Joe Mansueto
Joe Mansueto
founded Morningstar in 1984. He has served as our chairman since our inception,
and as our chief executive officer from inception to 1996 and from 2000 to the
present. He holds a bachelors degree in business administration from The
University of Chicago and a masters degree in business administration from The
University of Chicago Booth School of Business. Joe currently serves as a
member of the board of directors of Trans Union LLC.
Don Phillips
Don Phillips
has been one of our managing directors since 2000 and in 2009 became president
of fund research. He is responsible for overseeing our research on mutual
funds, exchange-traded funds, and alternative investments. He joined us in 1986
as our first analyst. He served as our vice president and publisher from 1991
to 1996, as our president from 1996 to 1998, and as our
Morningstar, Inc. 2010 Proxy Statement
04
chief
executive officer from 1998 to 2000. He has served on the Board since August 1999.
He also serves on the board of directors for Morningstar Japan. He holds a
bachelors degree in English from the University of Texas and a masters degree
in American literature from The University of Chicago.
Cheryl Francis
Cheryl
Francis was elected to the Board in July 2002. She has been co-chairman,
Corporate Leadership Center, since August 2008 and vice-chairman from 2002
to August 2008. She has been an independent business and financial advisor
since 2000. From 1995 to 2000, she served as executive vice president and chief
financial officer of R.R. Donnelley & Sons Company, a print media
company. She currently serves as a member of the board of directors of HNI
Corporation and Hewitt Associates, Inc., as well as a trustee for Cornell
University. She holds a bachelors degree from Cornell University and a masters
degree in business administration from The University of Chicago Booth School
of Business.
Steve Kaplan
Steve Kaplan
served as a member of our advisory board beginning in 1998 and was elected to
the Board in August 1999. Since 1988, he has been a professor at The
University of Chicago Booth School of Business where he currently is the
Neubauer Family Professor of Entrepreneurship and Finance. He holds a bachelors
degree in applied mathematics and economics from Harvard College and a Ph.D. in
business economics from Harvard University. He also serves as a member of the
board of directors of Accretive Health, Inc. and on the board of trustees
of the Columbia Acorn Funds.
Bill Lyons
Bill Lyons
was appointed to the Board in September 2007. He served as president and
chief executive officer of American Century Companies, Inc., an investment
management company, from September 2000 until his retirement in March 2007.
From 1987 to 2000, he served in other capacities at American Century Companies, Inc.,
including as general counsel and chief operating officer. He currently serves
as a member of the board of directors of NIC Inc. He holds a bachelors degree
in history from Yale University and a juris doctor degree from Northwestern
University School of Law.
Jack Noonan
Jack Noonan
served as a member of our advisory board beginning in 1998 and was elected to
the Board in August 1999. He is a private investor and served as
transition executive of SPSS Inc., a software company specializing in
predictive analytics, from October 2009 to December 2009. From 1992
to October 2009, he served as president, chief executive officer, and
chairman of the board of directors of SPSS Inc.
Paul Sturm
Paul Sturm
served as a member of our advisory board beginning in 1998 and was elected to
the Board in August 1999. He is a private investor and wrote a monthly
column on investing for
Smart Money
magazine between 1992 and 2006. From 1985 to 1989, he was assistant managing
editor at
Business Week
. From 1980 until 1985, he
held a similar position at
Forbes
. Prior
to that, he worked as a business writer for a variety of publications based in
New York, Washington, and London. He holds a bachelors degree in economics
from Oberlin College and a masters degree in journalism from Columbia
University. He received a juris doctor degree from Georgetown University Law
Center.
Hugh Zentmyer
Hugh
Zentmyer was appointed to the Board in January 2010. He served as
executive vice president of Illinois Tool Works Inc., a diversified
manufacturer of industrial systems and components, from 1995 until his
retirement in January 2009. He holds a bachelors degree in accounting
from the University of Cincinnati and a masters degree in business
administration from Xavier University.
Morningstar, Inc. 2010 Proxy Statement
05
_____________________________________________________
Proposal 2:
Ratification of Appointment of Independent
Registered Public Accounting Firm
The Audit
Committee has appointed Ernst & Young LLP as our independent
registered public accounting firm for the year ending December 31, 2010.
As a matter of good corporate governance, we are asking shareholders to ratify
the appointment of Ernst & Young. If the appointment is not ratified,
the Audit Committee will consider whether it is appropriate to select another
independent registered public accounting firm.
We expect
that a representative of Ernst & Young will attend the annual meeting,
and the representative will have an opportunity to make a statement if he or
she so desires. The representative will also be available to respond to
appropriate questions from shareholders.
See Board of
Directors and Corporate GovernanceBoard Committees and ChartersAudit
Committee, Audit Committee Report, and Principal Accounting Firm Fees for
additional information pertaining to the Audit Committee, its activity during
2009, and related matters.
Recommendation of the Board
The Board of Directors recommends that you vote
FOR
the ratification of the appointment of Ernst &
Young as our independent registered public accounting firm for 2010.
Morningstar, Inc. 2010 Proxy Statement
06
_____________________________________________________
Board of Directors and Corporate Governance
We have
adopted a set of Corporate Governance Guidelines to allocate duties and
authority between the Board and our management team. These guidelines reflect
the Boards commitment to monitor policies and decision-making at both the
Board and management levels, with the goal of enhancing shareholder value over
the long-term. The shareholders elect the Board and vote on extraordinary
matters. Our Board currently consists of nine directors, eight of whom are
standing for re-election at the annual meeting. The Board believes that there
should be a substantial majority of independent directors on the Board. The
Board also believes that it is useful and appropriate to have members of
management, including the chief executive officer, as directors. The current
Board members include seven independent directors and two members of our senior
management team. Frank Ptak is not standing for re-election at the annual
meeting. Our Board will consist of eight directors at that time.
Independent
Directors
Each of our
directors, other than Joe Mansueto and Don Phillips, qualifies as independent
under NASDAQ requirements. The NASDAQ independence rules preclude a
finding of independence if the director is employed by the company or has
engaged in various types of business dealings with the company. In reaching its
conclusion that each of our non-employee directors is independent, the Board
has determined that none of our non-employee directors has a relationship with
the company that would interfere with the exercise of his or her independent
judgment.
In making
this determination, the Board reviewed and discussed information provided by
the directors and management with regard to each directors business and
personal activities as they relate to the company. For Cheryl Francis, the
Board considered ordinary course transactions between the company and Hewitt
Associates, Inc., where she is a member of the board of directors, and
ordinary course transactions between the company and the Corporate Leadership
Center, where she is co-chairman. For Steve Kaplan, the Board considered
ordinary course transactions between the company and Columbia Acorn Funds,
where he is a member of the board of trustees, and a charitable contribution of
$25 million to be paid over time by Joe Mansueto to support the construction of
a new library at the University of Chicago, where Steve is a professor. For
Bill Lyons, the Board considered ordinary course transactions between the
company and American Century Companies, Inc. and Bills equity interest in
American Century Companies, Inc., where he served as president and chief
executive officer until March 2007. For Jack Noonan, the Board considered
ordinary course transactions between the company and SPSS Inc., where he served
as president, chief executive officer, and chairman of the board of directors
until October 2009 and transition executive from October 2009 to December 2009,
and ordinary course transactions between the company and International Business
Machines Corporation, the parent company of SPSS Inc. For Frank Ptak, the Board
considered that his son, Jeff Ptak, is employed by Morningstar Investment
Services, Inc., a wholly owned subsidiary of the company. Paul Sturm and
Hugh Zentmyer do not have any relationships involving the company other than
their positions as members of the Board.
The Board
has determined that each member of the Audit Committee qualifies as independent
under special standards established by the SEC for members of audit committees.
The Board has also determined that each Audit Committee member has sufficient
knowledge to read and understand the companys financial statements and to
serve on the Audit Committee. Additionally, the Board has determined that
Cheryl Francis, the Chair of the Audit Committee, qualifies as an audit
committee financial expert under the relevant SEC rules. This designation is a
disclosure requirement of the SEC related to Cheryl Francis experience and
understanding with respect to certain accounting and auditing matters. The
designation does not impose upon her any duties, obligations, or liabilities
that are greater than those generally imposed on her as a member of the Audit
Committee and the Board. Her designation as an audit committee financial expert
pursuant to this SEC requirement does not affect the duties, obligations, or
liabilities of any member of the Audit Committee or the Board.
Morningstar, Inc. 2010 Proxy Statement
07
Board
Responsibilities and Structure
The primary
responsibilities of the Board are to provide oversight, counseling, and
direction to our management team in the long-term interests of the company and
our shareholders. The Boards responsibilities include: (a) selecting and
regularly evaluating the performance of the chief executive officer, (b) planning
for chief executive officer succession and monitoring succession planning for
other senior executives, (c) overseeing the conduct of our business to
evaluate whether the business is being properly managed, (d) risk
oversight, and (e) overseeing the processes for maintaining the integrity
of our financial statements and other public disclosures and compliance with
law and ethics. The chief executive officer and management are responsible for
seeking the advice and, in appropriate situations, the approval of the Board
with respect to certain extraordinary corporate actions.
The Board is
responsible for determining the roles of the chairman of the board and chief
executive officer. The Board recognizes that in some circumstances there can be
great value in having separate individuals serve as chairman and chief
executive officer. However, the Boards position has been that having Joe
Mansueto serve as both chairman and chief executive officer is in the best
interest of the company and its shareholders at this point in time given the
nature and size of our business, the companys current management needs, the
composition of the current board, and Joes position as founder and controlling
shareholder of the company. The Board would consider making a change to the
combined chairman and chief executive officer structure if it determined that
would be the best course of action for the company, but it believes this structure
has been working well.
The Board
has not designated a lead director; however, the independent directors may
choose from among them a lead director with respect to any matter. The practice
of allowing the independent directors to determine who among them will be
responsible with respect to any matter has been working well for the Board. The
Chair of the Nominating and Corporate Governance Committee works closely with
the chairman to set the agenda for each Board meeting and serves as a liaison
between the chairman and the independent directors.
The Board
and its committees meet throughout the year on a set schedule. From time to
time as appropriate, the Board and its committees also hold special meetings
and may act by written consent. Board agendas include regularly scheduled
sessions for the independent directors to meet without management present. The
independent directors determine who among them will be responsible for chairing
sessions for the independent directors. The Board has delegated various
responsibilities and authority to different Board committees, as described
below. These committees regularly report on their activities and actions to the
full Board. Board members have access to all of our employees outside of Board
meetings.
Boards Role in
Risk Oversight
The Boards
role in the companys risk oversight process involves both the Audit Committee
and the full Board. The Audit Committee reviews and discusses with management
risks relating to the companys financial systems and data in the context of
internal controls and legal exposure and the steps that management has taken to
monitor and control them. Management identifies and prioritizes enterprise-wide
risks. On an annual basis, the full Board receives a presentation by management
on enterprise risk, including operational, financial, legal and regulatory, and
strategic and reputational risks. Additional reporting on enterprise risks is
conducted as needed or as requested by the Board. The Board believes its
oversight of risk is enhanced by its current leadership structure as discussed
above because our chief executive officer, who is ultimately responsible for
the companys management of risk, also chairs regular board meetings, and with
his in-depth knowledge and understanding of the company, is best able to bring
key business issues and risks to the Boards attention.
Risk
Considerations in our Compensation Program
We believe
that risks arising from our compensation policies and practices for our
employees are not reasonably likely to have a material adverse effect on the
company. In reaching this determination, we have taken into account the
following design elements of our compensation policies and practices: the
mixture of cash and equity-based compensation incents an appropriate balance
between short-term and long-term risk, multi-year vesting of equity awards
encourages employees to focus on the long-term operational and financial
performance of the company, the use of stock ownership requirements for our
executive
Morningstar, Inc. 2010 Proxy Statement
08
officers not
only aligns their interests with shareholders but also discourages behavior
that is focused only on the short-term, and the Compensation Committee has the
ability to exercise negative discretion in setting incentive payouts.
Attendance at
Board, Committee, and Annual Shareholders Meetings
The Board
held six meetings in 2009. We expect each director to attend each meeting of
the Board and the committees on which he or she serves, and also expect them to
attend the annual meeting. In 2009, each director attended all of the meetings
of the Board and the committees on which he or she served, except that Don
Phillips missed one Board meeting and Steve Kaplan missed one Audit Committee
meeting. Each of the directors then in office attended our 2009 Annual
Shareholders Meeting.
Board
Committees and Charters
The Board
currently has standing Audit, Compensation, and Nominating and Corporate
Governance Committees and appoints the members to each of these committees. Each
member of the Audit, Compensation, and Nominating and Corporate Governance
Committees is an independent director under NASDAQ standards. Each Board
committee has a written charter approved by the Board. A copy of each charter
is available on our Investor Relations website at
http://global.morningstar.com/US/InvestorRelations in the Corporate Governance
section. The table below shows the members of each committee and the number of
meetings held by each committee during 2009.
Director
|
|
Audit
|
|
Compensation
|
|
Nominating and Corporate
Governance
|
|
Joe Mansueto
|
|
|
|
|
|
|
|
Don Phillips
|
|
|
|
|
|
|
|
Cheryl Francis
|
|
Chair
|
|
Member
|
|
|
|
Steve Kaplan
|
|
Member
|
|
Chair
|
|
|
|
Bill Lyons
|
|
Member
|
|
Member
|
|
|
|
Jack Noonan
|
|
|
|
Member
|
|
Member
|
|
Frank Ptak
|
|
|
|
|
|
Member
|
|
Paul Sturm
|
|
Member
|
|
|
|
Chair
|
|
2009 Meetings
|
|
10
|
|
6
|
|
4
|
|
Audit Committee
The Audit
Committee assists the Board in its general oversight of our financial
reporting, internal controls, and audit functions and is directly responsible
for appointing, retaining, compensating, and overseeing the work of our
independent registered public accounting firm. We describe the responsibilities
and activities of the Audit Committee in greater detail in the Audit Committee
Report on page 29.
Compensation
Committee
The
Compensation Committee reviews and determines salaries, incentive plan awards,
and other matters relating to compensation of our executive officers, other
than the chief executive officer, based on feedback from our chief executive
officer about the individuals performance and overall contribution to the
company. It also makes recommendations to the Board concerning compensation for
the chief executive officer. The Compensation Committee administers our
equity-based compensation plans, including reviewing and granting equity-based
awards to our executive officers and other employees. The Compensation
Committee also reviews and determines various other Morningstar compensation
policies and related matters. The Compensation Committee makes recommendations
to the Board concerning our compensation practices for non-employee directors.
The Compensation Committee may, in its discretion and only to the extent
permitted by law, delegate its authority to a subcommittee of the Compensation
Committee. The Compensation Committee may engage its own outside advisors as it
deems appropriate. In 2009, the Compensation Committee didnt retain a
compensation consultant to advise it on executive compensation. We discuss
Morningstar, Inc. 2010 Proxy Statement
09
additional
information about the Compensation Committee, its activity during 2009, and
related matters in the Compensation Discussion and Analysis section, which
begins on page 16.
Nominating and
Corporate Governance Committee
The
Nominating and Corporate Governance Committee works with the Board to determine
the appropriate characteristics, skills, and experience for the Board as a
whole and its individual members. In evaluating the suitability of individual
Board members, the Nominating and Corporate Governance Committee and the Board
take into account many factors, including general understanding of marketing,
finance, and other disciplines relevant to the success of a publicly traded
company; understanding of our business; education and professional background,
including current employment and other board memberships; and reputation for
integrity. Although the company has no policy regarding diversity, the
Nominating and Corporate Governance Committee and the Board believe that it is
essential that the individual Board members represent diverse opinions,
perspectives, personal and professional experiences, and backgrounds. The
Nominating and Corporate Governance Committee reviews these factors and others
it considers useful in the context of the perceived needs of the Board. The priorities
and emphasis of the Nominating and Corporate Governance Committee and of the
Board may change from time to time to take into account changes in business and
other trends and the portfolio of skills and experience of current and
prospective Board members. The Nominating and Corporate Governance Committee
establishes procedures for the nomination process and recommends candidates for
election to the Board.
Consideration
of new Board nominee candidates involves a series of internal discussions, review
of information concerning candidates, and interviews with selected candidates.
Board members or employees typically suggest candidates for nomination to the
Board. In 2009, we did not employ a search firm or pay fees to other third
parties in connection with seeking or evaluating Board nominee candidates. Hugh
Zentmyer, who joined our Board in January 2010, was introduced to the
Board by Frank Ptak. With Franks decision to not stand for re-election at the
annual meeting, the Board sought to add a member with significant experience at
a large company. As a former executive vice president of Illinois Tool Works
Inc., Hughs experience fit the needs of the Board. The Nominating and
Corporate Governance Committee will consider candidates proposed by shareholders.
The Committee evaluates candidates proposed by shareholders using the same
criteria as for other candidates. A shareholder seeking to recommend a
prospective nominee for the Nominating and Corporate Governance Committees
consideration should submit the candidates name and qualifications to Richard
Robbins, General Counsel and Corporate Secretary, Morningstar, Inc., 22
West Washington Street, Chicago, Illinois 60602.
The
Nominating and Corporate Governance Committee reviews and makes recommendations
to the Board regarding the appropriate size, performance, composition, duties,
and responsibilities of the Board and each of its committees. The Nominating
and Corporate Governance Committee also reviews and reports to the Board on a
periodic basis on corporate governance matters.
Director
Qualifications
Each
director brings a strong and unique background and set of skills to the Board,
giving the Board as a whole competence and experience in a wide variety of
areas. We describe certain individual qualifications and skills that led the
Board to conclude that each person should serve as a director below. Additional
details on our director nominees are set forth in their biographies beginning
on page four.
·
As the founder and controlling shareholder of the company, Joe Mansuetos
knowledge of all aspects of the business and its history position him well to
serve as our chairman and chief executive officer.
·
Don Phillips brings to the Board an in-depth understanding of the investment
industry. He is a public advocate for investors, with vast experience in
analyzing and commenting on investment trends.
Morningstar, Inc. 2010 Proxy Statement
10
·
Cheryl Francis is an experienced financial leader. Her experience serving as
the chief financial officer of a public company makes her a valuable asset,
both on our Board and as Chair of the Audit Committee. Cheryl also currently
serves on the board of two other public companies and qualifies as an audit
committee financial expert under the relevant SEC rules.
·
Steve Kaplan has an extensive background in academia. As a professor, his
research and teaching focus on issues in private equity and entrepreneurial
finance. His expertise is valuable in analyzing our business and potential
acquisitions.
·
As the former chief executive officer of a private investment management
company, Bill Lyons has extensive experience in the mutual fund industry. His
business acumen and knowledge of the mutual fund industry provide our Board
with unique insight and a keen perspective on the priorities of and challenges
facing our customers. Bill also currently serves on the board of another public
company.
·
As the former chief executive officer of a public company, Jack Noonan offers a
wealth of management experience and business understanding. Jacks exposure to
the complex issues facing a global provider of software makes him a valuable
component of our Board.
·
Paul Sturm brings to the Board his unique perspective as a financial
journalist, a comprehensive understanding of the investment media, as well as a
deep understanding of our people, culture, and products.
·
As the president and chief executive officer of Marmon Holdings, Inc. and
former vice chairman of Illinois Tool Works Inc., Frank Ptak has significant
experience running large companies. He provides the Board with critical
insights into the operational issues facing large organizations as well as
practical guidance regarding potential acquisitions.
·
With his years of experience working at a large decentralized company, Hugh
Zentmyer brings to the Board his understanding of what makes businesses work
effectively and efficiently. He has experience leading businesses with
worldwide operations that market their products through multiple channels. His
international strategic acquisition experience fits well with our companys
emphasis on global expansion as part of its growth strategy.
Limitation on
Other Board Service
We require
that our directors who are currently serving as the chief executive officer or
other executive officer of a public company serve on a total of no more than
three public company boards. We require that our directors who are not
currently serving as a chief executive officer or other executive officer of a
public company serve on no more than four public company boards.
Communications from Shareholders to the Board
Shareholders
may initiate communications with the Board by writing in care of our General
Counsel and Corporate Secretary. Shareholders can send communications to
Richard Robbins, General Counsel and Corporate Secretary, Morningstar, Inc.,
22 West Washington Street, Chicago, Illinois 60602. This centralized process
assists the Board in reviewing and responding to shareholder communications in
an appropriate manner. The name of any specific intended Board recipient should
be noted in the communication. The Board has instructed our General Counsel and
Corporate Secretary to forward correspondence only to the intended recipients;
however, the Board has also instructed him to review the correspondence prior
to forwarding it and, in his discretion, not to forward certain items if he
deems them to be of a commercial or frivolous nature or otherwise inappropriate
for the Boards consideration. In these cases, he may forward some of the
correspondence elsewhere in the company for review and possible response.
Corporate
Governance Guidelines
The Board
has adopted a set of Corporate Governance Guidelines. The Nominating and
Corporate Governance Committee is responsible for overseeing the Corporate
Governance Guidelines and reporting and making recommendations to the Board
Morningstar, Inc. 2010 Proxy Statement
11
concerning
corporate governance matters. We have posted the guidelines on our Investor
Relations website at http://global.morningstar.com/US/InvestorRelations in the
Corporate Governance section.
Among other
matters, the Corporate Governance Guidelines include the following items
concerning the Board:
·
The Board believes five to 12 board members is an appropriate size based on our
present circumstances. The Board periodically evaluates whether a larger or
smaller slate of directors would be preferable.
·
The Board may fill Board vacancies. Directors appointed by the Board serve only
until the next election of directors unless elected by the shareholders to a
further term at that time.
·
The Board believes that, except during periods of temporary vacancies, a
substantial majority of its directors must be independent. In determining the
independence of a director, the Board applies the relevant NASDAQ requirements
and applicable laws and regulations.
·
The Board believes that non-employee directors who have served on the Board for
12 full one-year terms, whether those 12 one-year terms are served
consecutively or not, should be required to take at least a two-year absence
from the Board. After a non-employee director is off the Board for two years
following the completion of 12 years of service, he or she will again be
eligible to serve on the Board. Time served on the Board prior to the
completion of our initial public offering is not counted against a non-employee
directors limit of 12 one-year terms. The Board believes that this term limit
will help ensure that there are fresh ideas and viewpoints available.
·
The Board believes that it should evaluate the abilities and contributions of
each director according to the process described above, and does not believe it
should fix a retirement age for directors.
·
The Board believes that any director who retires from his or her present
employment or who materially changes his or her position should promptly tender
a written resignation to the Board. The Nominating and Corporate Governance
Committee will then evaluate whether the Board should accept the resignation
based on a review of whether the director continues to satisfy the Boards
membership criteria in light of his or her changed status.
·
All directors must comply with the applicable provisions of our Code of Ethics,
including the Conflicts of Interest section. If an actual or potential conflict
of interest develops for any reason, including, without limitation, because of
a change in our business operations, or in a directors circumstances, the
director should immediately report that matter to our General Counsel for evaluation.
If a significant conflict cannot be resolved, the director may be expected to
resign.
·
If a director has a personal interest in a matter before the Board, the
director must disclose the interest to the Board, excuse himself or herself
from participation in the discussion, and may not vote on the matter.
The
Corporate Governance section of our Investor Relations website at
http://global.morningstar.com/US/InvestorRelations also includes our Code of
Ethics and our Securities Trading and Disclosure Policy, each of which has been
adopted by the Board.
Directors
Compensation
The Board
establishes non-employee directors compensation based on the recommendation of
the Compensation Committee. Directors who are also our employees do not receive
any additional compensation for serving on the Board or attending Board
meetings. Our non-employee directors receive cash compensation and equity-based
compensation.
Morningstar, Inc. 2010 Proxy Statement
12
Cash
Compensation
Each
non-employee director is entitled to receive a fee of $1,000 per Board meeting
and $500 per committee meeting attended, plus travel expenses in connection
with attendance at meetings. The Chairman of the Board or relevant Committee
Chair has the discretion to waive fees for brief meetings not requiring
significant preparation. The Audit Committee Chair receives a cash retainer of
$25,000 and the Compensation Committee Chair receives a cash retainer of
$10,000.
In January 2010,
the Board decided to replace per meeting fees with an annual retainer of
$10,000 to non-employee directors. Non-employee directors who are members of a
committee will receive an additional annual retainer of $5,000 per committee.
The Audit Committee Chair and Compensation Committee Chair will continue to receive
an annual retainer of $25,000 and $10,000, respectively. We will begin paying
annual retainer fees instead of per meeting fees in May 2010.
Equity-Based
Compensation
Each of our
non-employee directors receives an annual grant of restricted stock units
covering shares with a value of $110,000 at grant, which vest over a period of
three years. New non-employee directors, in lieu of receiving an annual grant
of restricted stock units, receive an initial grant of restricted stock units
covering shares with a value of $250,000 at grant, also vesting over a period
of three years. Non-employee directors who are required to stop serving on the
Board by virtue of the companys 12 year-term limit described under Board of
Directors and Corporate GovernanceCorporate Governance Guidelines, do not
forfeit their unvested restricted stock units. In past years, non-employee
directors were permitted to defer receipt of the stock that otherwise would
have been issued when their restricted stock units vested. We eliminated this
deferral feature for new grants as of January 1, 2009.
2009 Directors
Compensation
The
following table shows compensation earned by each of our non-employee directors
in 2009, other than Hugh Zentmyer, who joined the Board in January 2010.
Joe Mansueto and Don Phillips are members of our Board and Morningstar
employees. Neither receives any additional compensation for serving on the
Board or attending Board meetings.
|
|
Fees
Earned
or Paid in Cash
|
1
|
Stock
Awards
|
2
|
Total
|
|
Cheryl Francis
|
|
$39,000
|
|
$109,975
|
|
$148,975
|
|
Steve Kaplan
|
|
24,000
|
|
109,975
|
|
133,975
|
|
Bill Lyons
|
|
14,000
|
|
109,975
|
|
123,975
|
|
Jack Noonan
|
|
10,500
|
|
109,975
|
|
120,475
|
|
Frank Ptak
|
|
7,500
|
|
109,975
|
|
117,475
|
|
Paul Sturm
|
|
12,500
|
|
109,975
|
|
122,475
|
|
(1) Amounts
shown include the amounts described above under Cash Compensation. The fees
earned by Cheryl Francis and Steve Kaplan include $25,000 and $10,000,
respectively, for service as a Committee Chair.
(2) As
required by relevant SEC rules, the amounts shown represent the grant date fair
value for restricted stock unit awards granted in 2009 as determined pursuant
to Financial Accounting Standards Board Accounting Standards Codification Topic
718, CompensationStock Compensation. See Note 10 of the Notes to our Consolidated
Financial Statements included in our Annual Report on Form 10-K for the
year ended December 31, 2009 for a discussion of the relevant assumptions
used in calculating this amount. As of December 31, 2009, our non-employee
directors held the following number of restricted stock units: Cheryl Francis
4,598, Steve Kaplan 8,555, Bill Lyons 5,033, Jack Noonan 4,598, Frank Ptak
9,416, and Paul Sturm 4,598. We did not grant stock options to our non-employee
directors in 2007, 2008, or 2009. As of December 31, 2009, our
non-employee directors held options with respect to the following number of
shares: Cheryl Francis 32,397, Steve Kaplan 4,001, Bill Lyons 0, Jack Noonan
48,000, Frank Ptak 0, and Paul Sturm 60,000. Hugh Zentmyer joined our Board in January 2010.
He held no Morningstar stock options or restricted stock units at December 31,
2009. He will receive his initial grant of restricted stock units in May 2010.
Morningstar, Inc. 2010 Proxy Statement
13
_____________________________________________________
Security Ownership of Certain
Beneficial
Owners and Management
The following table shows information about beneficial
ownership of our common stock as of March 1, 2010 by each of our
directors, each of the executive officers identified in the compensation tables
included in this proxy statement, each holder of more than 5% of our common
stock, and all of our directors and executive officers as a group. Except as
otherwise indicated in the notes to the table, each person named in the table
has sole voting and investment power with respect to the shares listed.
The following table is based on 48,804,397 shares of our
common stock outstanding as of March 1, 2010.
Shareholder
|
|
Number
of Shares
Beneficially Owned
|
|
Percentage
of
Common Stock
|
|
Joe Mansueto
1
|
|
25,626,446
|
|
52.51
|
%
|
Scott Cooley
2
|
|
50,293
|
|
*
|
|
Tao Huang
3
|
|
510,672
|
|
1.04
|
|
Patrick Reinkemeyer
4
|
|
319,943
|
|
*
|
|
Richard Robbins
5
|
|
28,801
|
|
*
|
|
Don Phillips
6
|
|
446,951
|
|
*
|
|
Cheryl Francis
7
|
|
36,354
|
|
*
|
|
Steve Kaplan
8
|
|
72,458
|
|
*
|
|
Bill Lyons
|
|
4,854
|
|
*
|
|
Jack Noonan
9
|
|
77,457
|
|
*
|
|
Frank Ptak
10
|
|
6,561
|
|
*
|
|
Paul Sturm
11
|
|
135,438
|
|
*
|
|
Hugh Zentmyer
|
|
0
|
|
*
|
|
All directors and executive officers as of March 1, 2010 as a
group (20 persons)
12
|
|
28,137,776
|
|
56.36
|
|
Morgan Stanley
13
|
|
3,901,381
|
|
7.99
|
|
Baron Capital Group, Inc.
14
|
|
2,792,771
|
|
5.72
|
|
* Represents beneficial ownership of less than 1%.
(1) Joe Mansuetos address is c/o Morningstar, Inc.,
22 West Washington Street, Chicago, Illinois 60602. Joe has pledged 3,400,000
shares of our common stock as security under the terms of a bank credit
agreement.
(2) Includes 39,090 shares of common stock issuable
upon exercise of stock options exercisable by April 30, 2010.
(3) Includes 72,500 shares of common stock issuable
upon exercise of stock options exercisable by April 30, 2010 and 14,733
shares of common stock that would be issued pursuant to vested restricted stock
units upon Tao Huangs termination of employment for any reason.
(4) Includes 274,500 shares of common stock issuable upon
exercise of stock options exercisable by April 30, 2010.
(5) Includes 25,000 shares of common stock issuable
upon exercise of stock options exercisable by April 30, 2010.
(6) Includes 110,000 shares of common stock issuable
upon exercise of stock options exercisable by April 30, 2010.
(7) Includes 31,897 shares of common stock issuable
upon exercise of stock options exercisable by April 30, 2010.
(8) Includes 4,001 shares of common stock issuable upon
exercise of stock options exercisable by April 30, 2010 and 3,957 shares
of common stock that would be issued pursuant to vested restricted stock units
upon Steve Kaplans departure from the Board.
(9) Includes 1,000 shares of common stock held by Jack
Noonans spouse and 48,000 shares of common stock issuable upon exercise of
stock options exercisable by April 30, 2010.
(10) Includes 6,561 shares of common stock that would
be issued pursuant to vested restricted stock units upon Frank Ptaks departure
from the Board.
(11) Includes 60,000 shares of common stock issuable upon
exercise of stock options exercisable by April 30, 2010.
(12) Includes 1,196,815 shares of common stock as to which
directors and executive officers have the right to acquire beneficial ownership
by April 30, 2010.
Morningstar, Inc. 2010 Proxy Statement
14
(13) The indicated interest is based solely on a Schedule
13G filed on February 12, 2010 by Morgan Stanley and Morgan Stanley
Investment Management Inc., a registered investment adviser and wholly owned
subsidiary of Morgan Stanley (MSIM), whose business addresses are 1585
Broadway, New York, NY 10036 and 522 Fifth Avenue, New York, NY 10036,
respectively. In its Schedule 13G, the reporting persons reported ownership as
of December 31, 2009 as follows:
|
|
Beneficial
Ownership
|
|
Sole Voting
Power
|
|
Shared
Voting
Power
|
|
Sole Investment
Power
|
|
Shared Investment
Power
|
|
Morgan Stanley
|
|
3,901,381
|
|
3,780,228
|
|
0
|
|
3,901,381
|
|
0
|
|
MSIM
|
|
3,421,794
|
|
3,300,641
|
|
0
|
|
3,421,794
|
|
0
|
|
(14) The indicated interest is based solely on a Schedule
13G filed on February 5, 2010 by Baron Capital Group, Inc. (BCG),
BAMCO, Inc., a registered investment adviser and wholly owned subsidiary
of BCG (BAMCO), Baron Capital Management, Inc., a registered investment
adviser and wholly owned subsidiary of BCG (BCM), and Ronald Baron whose
business addresses are 767 Fifth Avenue, New York, NY 10153. In its Schedule
13G, the reporting persons reported ownership as of December 31, 2009 as
follows:
|
|
Beneficial
Ownership
|
|
Sole Voting
Power
|
|
Shared
Voting
Power
|
|
Sole Investment
Power
|
|
Shared Investment
Power
|
|
BCG
|
|
2,792,771
|
|
0
|
|
2,465,071
|
|
0
|
|
2,792,771
|
|
BAMCO
|
|
2,792,771
|
|
0
|
|
2,465,073
|
|
0
|
|
2,792,771
|
|
BCM
|
|
156,019
|
|
0
|
|
155,019
|
|
0
|
|
156,019
|
|
Ronald Baron
|
|
2,792,771
|
|
0
|
|
2,465,071
|
|
0
|
|
2,792,771
|
|
Restricted Stock Units
The following table shows information about the number of
restricted stock units held as of March 1, 2010 by each of our directors,
each of the executive officers identified in the compensation tables included
in this proxy statement, and all of our directors and executive officers as a
group. The restricted stock units shown in this table will not vest by April 30,
2010.
|
|
Number of Restricted
Stock Units
|
|
Joe Mansueto
|
|
|
|
Scott Cooley
|
|
11,489
|
|
Tao Huang
|
|
28,530
|
|
Patrick Reinkemeyer
|
|
16,471
|
|
Richard Robbins
|
|
14,265
|
|
Don Phillips
|
|
9,672
|
|
Cheryl Francis
|
|
4,598
|
|
Steve Kaplan
|
|
4,598
|
|
Bill Lyons
|
|
5,033
|
|
Jack Noonan
|
|
4,598
|
|
Frank Ptak
|
|
2,855
|
|
Paul Sturm
|
|
4,598
|
|
Hugh Zentmyer
|
|
|
|
All directors and executive officers as of
March 1, 2010 as a group (20 persons)
|
|
172,948
|
|
Morningstar, Inc. 2010 Proxy Statement
15
_____________________________________________________
Compensation Discussion and
Analysis
In this section, we discuss the goals of our compensation
program and how we compensated each of the executive officers identified in the
following table in 2009. The individuals listed include our chief executive
officer, chief financial officer, plus our three other most highly compensated
executive officers (named executive officers).
Name
|
|
Title
|
Joe Mansueto
|
|
Chairman and
Chief Executive Officer
|
Scott Cooley
|
|
Chief Financial
Officer
|
Tao Huang
|
|
Chief Operating
Officer
|
Patrick
Reinkemeyer
|
|
President,
Morningstar Associates
|
Richard Robbins
|
|
General Counsel
and Corporate Secretary
|
Goals of Our Compensation Program
Our Compensation Committees compensation philosophy is to
pay members of our management team competitive base salaries and provide them
with the opportunity to earn meaningful equity-based and incentive compensation
through the Morningstar 2004 Stock Incentive Plan (the Stock Incentive Plan)
and the Morningstar Incentive Plan (the Incentive Plan).
The goals of our compensation program for management are to
develop compensation policies and practices that:
·
attract and retain talented executives;
·
motivate and reward our management team for their individual contributions to
the company; and
·
align managements interests with the long-term interests of our shareholders.
The Compensation Committee believes that, as members of our
management team take on more responsibility at Morningstar, variable incentive
pay and equity awards should make up a larger portion of their total
compensation. Our compensation program is designed to reward each member of our
management team based on his or her business and financial achievements and
overall contribution to the company.
The Compensation Committee doesnt use rigid formulas to
determine executive compensation. Nevertheless, the Compensation Committees
philosophy is to tie incentive compensation closely to value creation, as
measured by increases in EBIT (earnings before interest and taxes). The
Compensation Committee also pays a meaningful portion of compensation in the
form of equity awards. Our equity program, combined with our stock ownership
requirements for our executive officers and directors, reward long-term stock
performance. The Compensation Committee bases its decisions about an executives
compensation on its subjective assessment of his or her performance and
contribution toward enhancing the intrinsic value of our company. The
Compensation Committee relies on its judgment in determining the amounts and
combination of base salary, bonus, and equity awards. In 2009, the Compensation
Committee didnt retain a compensation consultant.
The Compensation Committee does, however, compare the total
compensation of our executives to what it sees in the market for companies of
similar size and operating in a similar business. The Compensation Committee
doesnt target specific compensation levels based on its review of other
companies pay practices, but believes its relevant to consider this
information as a check that our pay practices are competitive. In 2009, the
Compensation Committee compared the total compensation of our executives against
the total compensation provided to executives at Advent Software, Inc.,
FactSet Research Systems, Inc., Gartner, Inc., IHS Inc., Interactive
Data Corporation, MSCI Inc., RiskMetrics Group, Inc., and The Corporate
Executive Board Company.
Morningstar, Inc. 2010 Proxy Statement
16
CEO Compensation
In consideration of his status as our principal shareholder,
Joe Mansueto believes his compensation as our chief executive officer should be
realized primarily through appreciation in the long-term value of our common
stock. Accordingly, at his request, he doesnt participate in our equity or
cash-based incentive programs. In addition, since resuming his role as our
chief executive officer in 2000, his annual salary has been fixed at $100,000.
While the Compensation Committee may review and make recommendations to the
Board concerning Joes compensation, we expect that his salary will remain at
$100,000 per year for the foreseeable future.
Elements of our Compensation Program
Our compensation program currently consists of two main
elements: cash compensation, including annual base salary and annual bonus, and
equity-based compensation.
Cash Compensation
We pay cash compensation in the form of base salary and
bonuses under the Incentive Plan. We include bonuses in the compensation
package because the Compensation Committee believes they provide incentives to
support the goal of enhancing Morningstars long-term value. We describe each
component of cash compensation in more detail below.
Base Salary:
The Compensation Committee reviews
and determines the base salaries of our executive officers, other than the
chief executive officer, based on feedback from our chief executive officer
about the individuals performance and overall contribution to the company. It
also makes recommendations to the Board concerning compensation for the chief
executive officer. Because the Compensation Committee believes that variable
incentive pay should make up a large portion of each executive officers total
compensation, it does not make adjustments to base salary every year. These
adjustments, when made, are relatively modest. No salary increases were made
for our executive officers in 2009.
Bonus Plan:
The Incentive Plan, which was
adopted by our shareholders at the 2009 Annual Shareholders Meeting, rewards
participants for meeting and exceeding annual performance goals approved by the
Compensation Committee. As noted above, Joe Mansueto does not participate in
the Incentive Plan. The design of the Incentive Plan enables the Compensation
Committee to retain discretion to establish bonuses for our other executive
officers based on a subjective assessment of the individuals achievements and
the feedback from our chief executive officer about the individuals
performance and overall contribution to the company, while preserving the
companys ability to deduct the bonuses to the greatest extent permitted under Section 162(m) of
the Internal Revenue Code. As described in further detail below, in early 2009,
the Compensation Committee established the maximum potential bonus for each
executive officer under the Incentive Plan. This plan design allows the
Compensation Committee to exercise negative discretion in setting payouts under
the Incentive Plan.
2009 Bonus Determinations for Named Executive Officers (Other than Joe
Mansueto):
In response to a challenging
business environment Morningstar took a number of steps to reduce costs,
including reducing bonus expense. We include a description on page 19 of
how we determined the overall employee bonus pool.
In order to satisfy the performance-based requirements for
deductible compensation under Section 162(m) of the Internal Revenue
Code, in early 2009 the Compensation Committee established a performance-based
compensation measure of 0.9% of operating income before bonus expense (i.e.,
operating income plus bonus expense) for each executive officer. This measure
set the maximum potential bonus for each named executive officer at $1,316,700.
The Compensation Committee exercised its negative discretion to reduce the
bonus amounts for each executive officer, other than Tao Huang as described in
more detail below, based on overall company performance and the achievement of
individual goals.
Morningstar, Inc. 2010 Proxy Statement
17
In setting 2009 incentive bonuses and exercising its
negative discretion, the Compensation Committee considered the individual
performance of our executives based on the achievement of individual goals as
well as company profitability.
During 2009, our executives achieved many key operational
goals in an effort to improve efficiencies and control expenses but
nevertheless, corporate profitability declined in a much tougher business
environment than in the past.
Scott Cooley:
As the leader of the companys
finance organization, Scotts goals included making value added acquisitions,
enhancing the finance function with a focus on tax and global reporting
systems, strengthening the global finance staff, and identifying and
implementing opportunities for key members of his team.
In 2009, Scott led several cost-savings measures throughout
the organization to manage the company through the challenging business
environment and led the global finance teams through six acquisitions, four of
which were outside the United States. He strengthened the companys global
finance organization by hiring and promoting key individuals and enhancing our
financial reporting systems, while at the same time continuing to provide
strong operational support.
After considering the decline in corporate profitability and
the matters described in the preceding paragraph, the Compensation Committee,
based on Joes recommendation, awarded Scott a bonus of $180,000.
Tao Huang:
As chief operating officer, Taos
goals included making value-added acquisitions, implementing a new
organizational structure with emphasis on globalization and succession
planning, accelerating the release and expanding the functionality of several
Morningstar products, and identifying and implementing opportunities for key
members of his team.
In 2009, Tao made good efforts in helping to generate new
and renewal client revenue and cost-savings by increasing efficiency, played a
key role in several acquisitions, and continued to integrate past acquisitions
into the companys business and operations. He implemented a new organizational
structure improving productivity across several functional areas. Tao promoted,
mentored, and created new opportunities for key members of his team.
Had the Committee applied to Tao the same factors that it
had applied to all of the named executive officers, it would have awarded him a
bonus of $480,000. However, in determining the manner in which it would
exercise its discretion, the Committee also took into account the situation described
below regarding options previously granted to Tao. In light of that situation,
the Committee determined that it would not exercise its discretion to reduce
his award below the maximum performance-based amount of $1,316,700.
In 2000, Morningstar granted Tao options to purchase 750,000
shares of our common stock. Morningstar intended, at the time of grant, for
these options to be incentive stock options within the meaning of Section 422
of the Internal Revenue Code. In 2007, 2008, and 2009, Tao exercised these
options. Morningstar subsequently determined that these options did not
constitute incentive stock options but instead were non-qualified stock
options. This determination resulted in adverse tax consequences for Tao. The
Compensation Committee determined that it would be appropriate to restore to
Tao the originally intended economic benefit of the option grants made in 2000.
To that end, it determined that it would not exercise negative discretion to
reduce his bonus from the maximum performance-based amount permitted under the
Incentive Plan.
Patrick Reinkemeyer:
As
president of Morningstar Associates, Patricks goals included translating
research and innovation into products and services, expanding globally,
retaining clients, and identifying and implementing opportunities for key
members of his team.
Morningstar, Inc. 2010 Proxy Statement
18
In 2009, Morningstar Associates had a tough year with one
client not renewing its contract in the wake of another client not renewing its
contract at the end of 2008. Patrick implemented many strong client initiatives
with key clients and has been instrumental in successfully expanding the
investment consulting business and key staff in Europe.
After considering the decline in corporate profitability and
the matters described in the preceding paragraph, the Compensation Committee,
based on Joes recommendation, awarded Patrick a bonus of $135,000.
Richard Robbins:
As general counsel and
corporate secretary, Richs goals included making value-added acquisitions,
continuing to improve our public company disclosure and regulatory compliance,
mitigating global corporate risk, and identifying and implementing
developmental opportunities for key members of his team.
In 2009, Rich successfully managed legal costs without
comprising the quality of legal representation by outside counsel. He played a
critical role in negotiating the six acquisitions we completed in 2009. He made
significant progress in addressing regulatory and litigation matters, provided
valuable support to the Board, and enhanced Morningstars compliance training
initiatives. Rich also continued to expand the role and responsibilities of his
staff to better serve our business.
After considering the decline in corporate profitability and
the matters described in the preceding paragraph, the Compensation Committee,
based on Joes recommendation, awarded Rich a bonus of $180,000.
Company Bonus:
We believe it is useful to
describe how we determine the overall employee bonus pool. Our bonus plan
calculations are driven by changes in adjusted EBIT, which we call Bonus EBIT.
Bonus EBIT is pre-incentive compensation operating income adjusted to exclude
the impact of things we dont control, such as intangibles amortization, the
impact of currency exchange rates, and some operations such as certain recent
acquisitions which maintained their own bonus pools. In 2009, we also excluded
the impact of the adjustment to the tax treatment of certain stock options
granted to one former and two current executives, one of whom is Tao Huang,
that were originally considered incentive stock options and the Internal
Revenue Service penalties related to the timing of deposits for taxes withheld
on stock option exercises from 2006 through 2009.
We calculated Bonus EBIT on a company-wide basis as follows:
|
|
($ mil)
|
|
Operating income before bonus expense
|
|
$146.3
|
|
Intangibles amortization
|
|
18.9
|
|
Exchange rate adjustments
|
|
(2.1
|
)
|
Excluded operations
|
|
(2.9
|
)
|
Adjustment for expenses related to tax treatment of
certain stock options originally considered incentive stock options
|
|
6.1
|
|
Adjustment for penalties, primarily related to the
timing of deposits for taxes withheld on stock option exercises from 2006
through 2009
|
|
3.9
|
|
Bonus EBIT:
|
|
$170.2
|
|
Our bonus pool was determined based on the achievement of
target Bonus EBIT that was established by the Compensation Committee at the
beginning of 2009. Unlike previous years when we calculated individual business
unit pools based on year-over-year comparisons of individual business unit
results, this years pool was based on total company Bonus EBIT. The
Compensation Committee chose this approach partly because it felt it was
prudent in the context of volatile market conditions and partly because our
2009 reorganization made year-over-year business unit comparisons difficult.
Morningstar, Inc. 2010 Proxy Statement
19
The 2009 target Bonus EBIT was $170.2 million. At the
target, the bonus pool would have been $20.0 million. Under the 2009 bonus
plan, the bonus pool would be increased by $0.50 for every dollar that the
actual Bonus EBIT exceeded the target Bonus EBIT and decreased by $0.50 for
every dollar that the actual Bonus EBIT fell below the target Bonus EBIT. The
2009 Bonus EBIT was slightly above the target Bonus EBIT.
Once the bonus pool was determined, we subtracted the bonus
amounts paid to our executive officers and then allocated the remainder among
our business units to be distributed in the discretion of the relevant business
unit head, subject to final approval by Joe, Tao, and Scott. This year, of the
$1,316,700 paid to Tao under the Incentive Plan, only $480,000 was subtracted
from the bonus pool available for distribution to the business units.
Equity-Based Compensation
The Stock Incentive Plan provides for grants of options,
stock appreciation rights, restricted stock, restricted stock units, and
performance shares. All of our employees are eligible for awards under the
Stock Incentive Plan. Joe Mansueto does not participate in the Stock Incentive
Plan. Awards may also be made to our non-employee directors and consultants.
In 2006, we began awarding restricted stock units. A
restricted stock unit is an agreement to issue shares of stock at the time the
recipient completes a vesting period. Restricted stock units are similar in
many respects to restricted stock, which is issued when the award is first
made, but subject to forfeiture if the restricted stock does not vest.
Restricted stock units are easier to administer than restricted stock and dont
result in immediate dilution for other shareholders because the shares are not
issued until after the units vest.
We believe that restricted stock units are attractive for at
least two reasons. First, we use a value-based approach to equity-based compensation,
which means our goal when we issue an equity-based award is to deliver an award
that has a specific value at the time of grant. Second, unlike stock options,
restricted stock units never go out of the money, so they retain some
intrinsic value and therefore provide incentives under all scenarios.
Nevertheless, there may be times when we will elect to award stock options and
not restricted stock units because of the additional leverage or other
characteristics that distinguish stock options from restricted stock units.
Equity awards that vest over time are an important component
of how we reward our executive officers and other employees. We pay a
meaningful portion of executive officer compensation in the form of equity
awards because the Compensation Committee believes that equity awards can help
align the economic interests of our executive officers with those of our
shareholders. We also believe it is important for our executives to have a
long-term stake in the success of the business. The amount of equity-based
compensation that we provide to each executive officer in a given year
generally reflects the individuals level of responsibility within the company.
We generally prefer variable compensation to be in the form of cash incentives
rather than equity awards. We believe that keeping a consistent level of value
for equity awards as of the grant date encourages key managers to enhance the
value of the equity over time. This incentive also aligns with the goal of
increasing long-term shareholder value. Because we generally keep base salaries
low, having a consistent grant date value also provides an incentive for key
managers to continue their employment with us even at times when variable pay
or our stock price is lower.
The Compensation Committee determined annual equity grant
values for Tao and Patrick at the time our company became public in 2005 and
hasnt made major changes to these values since thenincluding when we switched
from granting stock options to restricted stock units. The Compensation
Committee determined the initial equity grant values by evaluating these
individuals total compensation in comparison with people in similar positions
at Advent Software, Inc. and FactSet Research Systems, Inc. The
Compensation Committee determined that the value of annual equity awards should
be about 30% of total compensation for these individuals. The Compensation
Committee determined Scotts annual equity award value when he became chief
financial officer in 2007 and Richs annual equity award value when he became
general counsel and corporate secretary in August 2005.
Morningstar, Inc. 2010 Proxy Statement
20
While the Compensation Committee has not adjusted the value
of annual equity grants significantly in recent years, the Compensation
Committee continues to review the annual equity award values for executive
officers to assure that it reflects each executives responsibility within the
company and encourages retention and long-term alignment with company success.
We also make grants to many other employees. For example, in 2009,
approximately 80% of the annual equity grant was made to employees other than
executive officers.
In May 2009, the Compensation Committee granted
restricted stock units to our named executive officers with a total value equal
to $1,392,075 with the value of each unit being deemed equal to $38.52, the
closing transaction price of a share of our common stock as reported by the
Nasdaq Stock Market on May 14, 2009 (the last trading day before the
effective date of the grant). The Compensation Committee granted restricted
stock units with a value equal to $249,995 to Scott Cooley, $549,989 to Tao
Huang, $317,097 to Patrick Reinkemeyer, and $274,994 to Richard Robbins. Each
restricted stock unit granted to employees vests in four equal annual
installments beginning on the first anniversary of the grant date.
The Compensation Committee believes that its current
compensation program for executive officers strikes the correct balance. This
mix of equity and cash compensation gives our executive officers a substantial
alignment with shareholders, while also permitting the Compensation Committee
to provide incentives for our executive officers to enhance the intrinsic value
of our company.
Practices Regarding the Grant of Equity Awards
The Compensation Committee makes equity grants once each
quarter, with the bulk of the grants being made to non-employee directors,
executive officers, and most other employees in the second quarter. We make
equity grants after the issuance of our quarterly or year-end earnings press
release. The Compensation Committee believes its appropriate to make awards at
a time when material information regarding our performance for the quarter or
year has been disclosed.
All restricted stock unit awards are made under the Stock
Incentive Plan, with the value of each unit being deemed equal to the closing
transaction price of a share of our common stock as reported by the Nasdaq
Stock Market on the last trading day before the effective date of grant. Other
than awards granted to our non-employee directors, each restricted stock unit
vests in four equal annual installments beginning on the first anniversary of
the grant date. Each restricted stock unit award granted to our non-employee
directors vests in three equal annual installments beginning on the first
anniversary of the grant date.
Employment Agreements, Change in Control Arrangements, and Deferred
Compensation
We do not have any employment agreements, termination
agreements, or change-in-control agreements with any of our executive officers.
If there is a change in control of Morningstar, the
Compensation Committee can vest or make exercisable, as the case may be,
unvested or not yet exercisable awards granted under the Stock Incentive Plan.
The following events constitute a change in control within the meaning of the
Stock Incentive Plan: the acquisition by a person or entity of more than 50% of
Morningstars common stock, other than by Joe Mansueto, his wife, children, or
any trustee or custodian on their behalf; a merger, consolidation, or statutory
share exchange involving Morningstar, unless shareholders receive more than 60%
of the stock of the surviving company or the parent company; a liquidation or
dissolution of Morningstar; or a sale of substantially all of Morningstars
assets. The Compensation Committee has not determined how it will exercise its
discretion if there is a change in control of Morningstar. If there had been a
change in control of Morningstar on December 31, 2009, and the
Compensation Committee accelerated vesting, the market value on that date of
the shares subject to unvested restricted stock units that would have vested
for the benefit of each of our named executive officers would have been: Joe
Mansueto $0; Scott Cooley $555,378; Tao Huang $1,379,140; Patrick Reinkemeyer
$796,208; and Richard Robbins $689,570. All stock options granted to our named
executive officers were fully exercisable as of December 31, 2009 so
acceleration of vesting as of that date is not relevant.
Morningstar, Inc. 2010 Proxy Statement
21
In February 2010, we entered into an agreement with Tao
Huang that obligated us to pay him $3,715,876 in connection with certain stock
options that we granted to him in 2000. Morningstar intended, at the time of
grant, that these stock options be incentive stock options within the meaning
of Section 422 of the Internal Revenue Code. We subsequently determined
that these stock options did not constitute incentive stock options but were
instead non-qualified stock options. This determination resulted in adverse tax
consequences for Tao in an amount equal to $3,715,876. The Compensation
Committee concluded that it would be appropriate to restore to Tao the
originally intended economic benefit of these option grants. As a result, in February 2010
we paid $3,715,876 to Tao, of which $1,316,700 was paid pursuant to the
Incentive Plan and is included in the Summary Compensation Table under the Non-Equity
Incentive Plan Compensation column. As contemplated by the relevant SEC rules,
the remaining $2,399,176 will be included in next years Summary Compensation
Table under the All Other Compensation column.
Other than our 401(k) plan, we do not have any plans
that permit employees to defer salary or bonus. We had a deferred compensation
agreement with Don Phillips, one of our executive officers, that ended in February 2009.
See Certain Relationships and Related Party TransactionsDeferred Compensation
Agreement with Don Phillips for a description of that agreement.
In past years, each person who received restricted stock
units (including directors and executive officers) was permitted to defer
receipt of the stock that otherwise would have been issued when the restricted
stock units vested except where it was prohibited by local tax law or not
practical. We eliminated this deferral feature for new grants as of January 1,
2009.
Perquisites and Personal Benefits
We seek to create standards for our facilities and
operations that are strongly tied to our core values and mission. Our office
environment is based on an open plan approach, without traditional offices,
that emphasizes equality, collaboration, and teamwork. We use this design at
our corporate headquarters and intend to expand it to other areas as we open or
redesign other offices. Our health care insurance and other welfare and
employee-benefit programs are the same for all eligible employees, including
our executive officers. We do not have programs for providing perquisites to
executive officers, such as permanent lodging or defraying the cost of personal
entertainment or family travel, nor do we own or lease aircraft. We do not
provide loans to our executives, although our 401(k) plan does permit
participants to borrow money against their accounts. The Summary Compensation
Table reflects certain benefits received by Scott Cooley in 2007 and 2008.
Scott worked as an expatriate in Australia prior to accepting the chief
financial officer position.
Stock Ownership Requirements
The Board has adopted stock ownership requirements for our
executive officers and directors. These guidelines are designed to encourage
our executive officers and directors to increase their equity stakes in
Morningstar and more closely link their economic interests with those of our
shareholders. We require each of our executive officers and directors to hold a
total number of shares, exercisable stock options, and vested restricted stock
units equal to at least 25% of the total number of exercisable stock options
and vested restricted stock units that he or she has been granted, excluding
stock options that were exercised before our initial public offering.
Tax Deductibility for Certain Compensation in Excess of $1.0 Million
Section 162(m) of the Internal Revenue Code
precludes publicly traded companies from deducting compensation in excess of
$1.0 million paid to the chief executive officer and the three other highest
compensated officers (other than the chief financial officer). However,
performance-based compensation is exempt from a deduction limit if certain
requirements are met. The Incentive Plan is designed to satisfy the relevant
requirements of Section 162(m). In 2009, the Compensation Committee
approved a performance measure to determine the maximum potential bonus for each
named executive officer. Based on individual results as well as overall company
performance, the Compensation Committee exercised its negative discretion to
reduce the bonus amounts for each executive officer, other than Tao Huang. The
amounts approved for our executive officers were at or below the maximum
permitted under the companys Section 162(m) performance measure.
Morningstar, Inc. 2010 Proxy Statement
22
_____________________________________________________
Compensation Committee Report
The Compensation Committee reviewed and discussed the
Compensation Discussion and Analysis with management. Based on the review and
discussions, the Compensation Committee recommended to the Board the inclusion
of the Compensation Discussion and Analysis in Morningstars proxy statement
and Annual Report on Form 10-K for the fiscal year ended December 31,
2009.
Compensation Committee
Steve Kaplan, Chair
Cheryl Francis
Bill Lyons
Jack Noonan
_____________________________________________________
Compensation Committee Interlocks
and
Insider Participation
None of our executive officers serves as a member of the
board of directors or the compensation committee of any other company that has
any executive officers serving as a member of our Board or compensation
committee.
Morningstar, Inc. 2010 Proxy Statement
23
_____________________________________________________
Executive Compensation
The following table shows compensation for our chief
executive officer, chief financial officer, and our three most highly
compensated executive officers (the named executive officers) in 2009.
Summary Compensation Table
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
|
1
|
|
Non-Equity
Incentive Plan Compensation
|
2
|
|
All
Other
Compensation
|
3
|
|
Total
|
|
Joe Mansueto
|
|
2009
|
|
$100,000
|
|
$
|
|
$
|
|
$
|
|
$ 20
|
|
$ 100,020
|
|
Chairman and
Chief Executive Officer
|
|
2008
|
|
100,000
|
|
|
|
|
|
|
|
6,145
|
|
106,145
|
|
|
|
2007
|
|
100,000
|
|
|
|
|
|
|
|
7,020
|
|
107,020
|
|
Scott Cooley
|
|
2009
|
|
225,000
|
|
|
|
249,995
|
|
180,000
|
|
187
|
|
655,182
|
|
Chief Financial
Officer
|
|
2008
|
|
225,000
|
|
450,000
|
|
249,958
|
|
61,506
|
|
21,861
|
|
1,008,325
|
|
|
|
2007
|
|
196,089
|
|
240,000
|
|
249,961
|
|
10,535
|
|
250,514
|
|
947,099
|
|
Tao Huang
|
|
2009
|
|
300,000
|
|
|
|
549,989
|
|
1,316,700
|
|
246
|
|
2,166,935
|
|
Chief Operating
Officer
|
|
2008
|
|
300,000
|
|
1,200,000
|
|
549,966
|
|
266,526
|
|
15,745
|
|
2,332,237
|
|
|
|
2007
|
|
300,000
|
|
1,040,000
|
|
549,970
|
|
193,649
|
|
15,761
|
|
2,099,380
|
|
Patrick
Reinkemeyer
|
|
2009
|
|
225,000
|
|
|
|
317,097
|
|
135,000
|
|
20
|
|
677,117
|
|
President,
Morningstar Associates
|
|
2008
|
|
225,000
|
|
1,000,000
|
|
317,083
|
|
276,777
|
|
15,520
|
|
1,834,380
|
|
|
|
2007
|
|
225,000
|
|
1,080,000
|
|
317,099
|
|
214,584
|
|
15,520
|
|
1,852,203
|
|
Richard Robbins
|
|
2009
|
|
250,000
|
|
|
|
274,994
|
|
180,000
|
|
207
|
|
705,201
|
|
General Counsel
and Corporate Secretary
|
|
2008
|
|
250,000
|
|
425,000
|
|
274,947
|
|
90,209
|
|
15,707
|
|
1,055,863
|
|
|
|
2007
|
|
250,000
|
|
440,000
|
|
274,960
|
|
73,273
|
|
15,707
|
|
1,053,940
|
|
(1) As required by relevant SEC rules, the amounts
represent the grant date fair value for restricted stock unit awards granted in
2009 as determined pursuant to Financial Accounting Standards Board Accounting
Standards Codification Topic 718, CompensationStock Compensation (FASB ASC
Topic 718). See Note 10 of the Notes to our Consolidated Financial Statements
included in our Annual Report on Form 10-K for the year ended December 31,
2009 for a discussion of the relevant assumptions used in calculating this
amount. For further information on these awards, see the 2009 Grants of
Plan-Based Awards table beginning on page 26 of this Proxy Statement.
(2) Morningstars Incentive Plan first became fully
subject to Section 162(m) of the Internal Revenue Code in 2009 and
the bonus program for that year was structured so that bonus payments qualify
as being performance-based under the relevant regulations. Accordingly, as
required by SEC rules, bonuses for 2009 are in the Non-Equity Incentive Plan
Compensation column. Bonus payments for 2007 and 2008 were discretionary in
nature and fully deductible under the relevant Internal Revenue Service
regulations pursuant to transition relief for newly public companies. In view
of the discretionary nature of the payments and relevant SEC rules, bonus
payments for 2007 and 2008 are reflected in the Bonus column. Amounts shown
in the Non-Equity Incentive Plan Compensation column for 2007 and 2008
include deferred cash bonus amounts under the Incentive Plan that were paid for
meeting performance targets for (a) 2006 and 2007 and (b) 2007 and
2008. If targets for both years had not been met, the amounts would not have
been paid. Deferred payments included one years interest at a blended 13-week
Treasury Bill rate as adjusted on January 1 and July 1. This deferral
was eliminated for bonus amounts paid for 2008 and subsequent years
performance.
Morningstar, Inc. 2010 Proxy Statement
24
(3) For 2009, the amounts shown include amounts paid
for basic life and accidental death and dismemberment insurance as follows: Joe
Mansueto $20; Scott Cooley $187; Tao Huang $246; Patrick Reinkemeyer $20; and
Richard Robbins $207.
For 2008, the amounts shown include the following:
|
|
Amounts Paid for
Basic Life and
Accidental Death and
Dismemberment
Insurance
|
|
Matching
Contributions to Our
401(k) Plan
|
|
Other
|
|
Total
|
|
Joe Mansueto
|
|
$ 20
|
|
$ 6,125
|
|
$
|
|
$ 6,145
|
|
Scott Cooley
|
|
187
|
|
15,500
|
|
6,174
|
a
|
21,861
|
|
Tao Huang
|
|
246
|
|
15,499
|
|
|
|
15,745
|
|
Patrick Reinkemeyer
|
|
20
|
|
15,500
|
|
|
|
15,520
|
|
Richard Robbins
|
|
207
|
|
15,500
|
|
|
|
15,707
|
|
(a) For Scott Cooley, the amounts shown include
expatriate-related expenses consisting of tax equalization payments.
For 2007, the amounts shown include the following:
|
|
Amounts Paid for
Basic Life and
Accidental Death and
Dismemberment
Insurance
|
|
Matching
Contributions to Our
401(k) Plan
|
|
Other
|
|
Total
|
|
Joe Mansueto
|
|
$ 20
|
|
$ 7,000
|
|
$
|
|
$ 7,020
|
|
Scott Cooley
|
|
20
|
|
15,500
|
|
234,994
|
a
|
250,514
|
|
Tao Huang
|
|
261
|
|
15,500
|
|
|
|
15,761
|
|
Patrick Reinkemeyer
|
|
20
|
|
15,500
|
|
|
|
15,520
|
|
Richard Robbins
|
|
207
|
|
15,500
|
|
|
|
15,707
|
|
(a) For Scott Cooley, the amounts shown include
expatriate-related expenses consisting of $28,820 for rent and utilities,
$40,000 for relocation expenses, and amounts for food allowance, per diem, tax
preparation services, medical exams for visa renewal purposes for Scott and his
family, and tuition reimbursement for Scotts children. Amounts shown also
include $109,291 of tax equalization payments and $28,845 of tax payments paid
by the company for Scott relating to these expatriate-related expenses to
reduce double taxation.
Morningstar, Inc. 2010 Proxy Statement
25
2009 Grants of Plan-Based Awards
The following table shows information concerning the grant
of plan-based awards in 2009 to each of our named executive officers.
|
|
Grant Date
|
|
Approval Date
|
1
|
Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards: Target
|
2
|
All Other Stock
Awards: Number
of Shares of
Stocks or Units
|
3
|
Grant Date Fair
Value of
Stock Awards
|
4
|
Joe Mansueto
|
|
|
|
|
|
$
|
|
|
|
$
|
|
Scott Cooley
|
|
May 15, 2009
|
|
May 8, 2009
|
|
|
|
6,490
|
|
249,995
|
|
Tao Huang
|
|
May 15, 2009
|
|
May 8, 2009
|
|
|
|
14,278
|
|
549,989
|
|
Patrick Reinkemeyer
|
|
May 15, 2009
|
|
May 8, 2009
|
|
|
|
8,232
|
|
317,097
|
|
Richard Robbins
|
|
May 15, 2098
|
|
May 8, 2009
|
|
|
|
7,139
|
|
274,994
|
|
(1) On May 8, 2009 the Compensation Committee
approved a grant of restricted stock units for Scott Cooley, Tao Huang, Patrick
Reinkemeyer, and Richard Robbins. The Compensation Committee designated May 15,
2009 as the grant date of each restricted stock unit grant approved at the
meeting.
(2) As described under Compensation Discussion and
AnalysisBonus Plan, each named executive officer participated in the Incentive
Plan for 2009. While the Incentive Plan does not make use of threshold or
target awards that may be quantified at the beginning of the performance
period, the Incentive Plan is designed to comply with the requirements of Section 162(m) of
the Internal Revenue Code. As a result, in early 2009 the Compensation
Committee established a performance-based compensation measure that set the
maximum potential bonus for each named executive officer, other than Joe, under
the Incentive Plan, at $1,316,700, subject to the ability of the Committee to
reduce that amount in the exercise of its discretion. In addition, due to the
nature of the Incentive Plan, it is not possible to provide a meaningful
representative amount based on the previous years performance.
(3) Amounts shown consist of restricted stock units
granted under the Stock Incentive Plan. These restricted stock units vest in
four equal annual installments beginning on the first anniversary of the grant
date.
(4) Amounts shown represent the grant date fair value
for each restricted stock unit award granted in 2009 as determined pursuant to
FASB ASC Topic 718. See Note 10 of the Notes to our Consolidated Financial
Statements included in our Annual Report on Form 10-K for the year ended December 31,
2009 for a discussion of the relevant assumptions used in calculating this
amount.
Morningstar, Inc. 2010 Proxy Statement
26
2009 Outstanding Equity Awards at Fiscal Year-End
The following table shows certain information concerning
outstanding equity awards for our named executive officers as of December 31,
2009.
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
Market Value
|
|
|
|
Underlying
|
|
|
|
|
|
Number of
|
|
of Shares or
|
|
|
|
Unexercised
|
|
Option
|
|
|
|
Shares or Units
|
|
Units of Stock
|
|
|
|
Options
|
|
Exercise
|
|
Option
|
|
of Stock That
|
|
That Have
|
|
|
|
Exercisable
|
|
Price
|
|
Expiration Date
|
|
Have Not Vested
|
|
Not Vested
|
|
Joe Mansueto
|
|
|
|
$
|
|
|
|
|
|
$
|
|
Scott Cooley
|
|
|
|
|
|
|
|
11,489
|
1
|
555,378
|
|
|
|
90
|
|
14.13
|
|
May 1, 2010
|
|
|
|
|
|
|
|
7,500
|
|
14.13
|
|
May 1, 2011
|
|
|
|
|
|
|
|
1,500
|
|
10.95
|
|
May 1, 2012
|
|
|
|
|
|
|
|
10,000
|
|
8.57
|
|
May 1, 2013
|
|
|
|
|
|
|
|
10,000
|
|
14.70
|
2
|
December 1, 2014
|
|
|
|
|
|
|
|
10,000
|
|
18.50
|
3
|
May 2, 2015
|
|
|
|
|
|
Tao Huang
|
|
|
|
|
|
|
|
28,530
|
4
|
1,379,140
|
|
|
|
2,500
|
|
10.95
|
|
May 1, 2012
|
|
|
|
|
|
|
|
12,500
|
|
8.57
|
|
May 1, 2013
|
|
|
|
|
|
|
|
27,500
|
|
14.70
|
2
|
December 1, 2014
|
|
|
|
|
|
|
|
30,000
|
|
18.50
|
3
|
May 2, 2015
|
|
|
|
|
|
Patrick Reinkemeyer
|
|
|
|
|
|
|
|
16,471
|
5
|
796,208
|
|
|
|
4,500
|
|
14.13
|
|
May 1, 2010
|
|
|
|
|
|
|
|
50,000
|
|
14.13
|
|
March 5, 2011
|
|
|
|
|
|
|
|
15,000
|
|
14.13
|
|
May 1, 2011
|
|
|
|
|
|
|
|
10,000
|
|
10.95
|
|
May 1, 2012
|
|
|
|
|
|
|
|
10,000
|
|
8.57
|
|
May 1, 2013
|
|
|
|
|
|
|
|
150,000
|
|
14.70
|
2
|
December 1, 2014
|
|
|
|
|
|
|
|
35,000
|
|
18.50
|
3
|
May 2, 2015
|
|
|
|
|
|
Richard Robbins
|
|
|
|
|
|
|
|
14,265
|
6
|
689,570
|
|
|
|
25,000
|
|
31.90
|
7
|
September 30, 2015
|
|
|
|
|
|
(1) These restricted stock units vest as follows: 2,902
on May 15, 2010, 2,678 on May 15, 2011, 2,476 on May 15, 2012,
1,623 on May 15, 2013, and 905 on August 15, 2010 and 2011.
(2) The initial exercise price of $14.70 will increase
over the term of the options at a rate equal to the 10-year Treasury yield rate
as of the date of grant.
(3) The initial exercise price of $18.50 will increase
over the term of the options at a rate equal to the 10-year Treasury yield rate
as of the date of grant.
(4) These restricted stock units vest as follows:
11,284 on May 15, 2010, 8,229 on May 15, 2011, 5,447 on May 15,
2012, and 3,570 on May 15, 2013.
(5) These restricted stock units vest as follows: 6,528
on May 15, 2010, 4,745 on May 15, 2011, 3,140 on May 15, 2012,
and 2,058 on May 15, 2013.
(6) These restricted stock units vest as follows: 5,642
on May 15, 2010, 4,115 on May 15, 2011, 2,723 on May 15, 2012,
and 1,785 on May 15, 2013.
(7) The initial exercise price of $31.90 will increase
over the term of the options at a rate equal to the 10-year Treasury yield rate
as of the date of grant.
Morningstar, Inc. 2010 Proxy Statement
27
2009 Option Exercises and Stock Vested
The following table shows certain information concerning the
exercise of stock options and vesting of restricted stock units during the year
ended December 31, 2009 by our named executive officers.
Option
Awards
|
|
Stock
Awards
|
|
|
|
Number
of Shares
Acquired on Exercise
|
|
Value
Realized
on Exercise
|
|
Number
of Shares
Acquired on Vesting
|
|
Value
Realized
on Vesting
|
|
Joe
Mansueto
|
|
|
|
$
|
|
|
|
$
|
|
Scott
Cooley
|
|
|
|
|
|
2,184
|
|
89,458
|
|
Tao
Huang
|
|
673,000
|
|
17,417,213
|
|
7,715
|
|
297,182
|
1
|
Patrick
Reinkemeyer
|
|
|
|
|
|
4,469
|
|
172,146
|
|
Richard
Robbins
|
|
|
|
|
|
3,857
|
|
148,572
|
|
(1) Tao Huang deferred receipt of 3,056 and 2,783
shares of our common stock until May 15, 2013 and May 15, 2011,
respectively.
___________________________________________________
Equity Compensation Plan
Information
The following table includes certain information as of December 31,
2009 regarding our equity incentive plans.
|
|
|
|
|
|
Number of Securities Remaining
|
|
|
|
|
|
|
|
Available for Future Issuance
|
|
|
|
Number of Securities to be
|
|
Weighted Average
|
|
Under Equity Compensation Plans
|
|
|
|
Issued Upon Exercise of
|
|
Exercise Price
|
|
(Excluding Securities Covered by
|
|
|
|
Outstanding Options,
|
|
of Outstanding Options,
|
|
Outstanding Options, Warrants,
|
|
|
|
Warrants, and Rights
|
|
Warrants, and Rights
|
|
and Rights)
|
|
Equity incentive
plans
approved by shareholders
|
|
3,398,596
|
1
|
$16.63
|
2
|
2,143,158
|
|
Equity incentive
plans
not approved by shareholders
|
|
0
|
|
|
|
0
|
|
Total
|
|
3,398,596
|
|
$16.63
|
|
2,143,158
|
|
(1) Includes 721,019 restricted stock units that were
outstanding as of December 31, 2009 under the Morningstar 2004 Stock
Incentive Plan.
(2) Restricted stock unit awards do not have an
exercise price. Accordingly, the outstanding restricted stock units have been
disregarded for purposes of computing the weighted average exercise price.
Morningstar, Inc. 2010 Proxy Statement
28
___________________________________________________
Audit Committee Report
The ultimate responsibility for good corporate governance
rests with the Board, whose primary roles are providing oversight, counseling,
and direction to our management team in the best long-term interests of the
company and its shareholders. The Audit Committee oversees Morningstars
accounting and financial reporting processes, as well as audits of Morningstars
annual financial statements and internal control over financial reporting.
The Audit Committee is
made up solely of independent directors, as defined under NASDAQ and SEC rules,
and it operates under a written charter adopted by the Board, a copy of which
is posted on our Investor Relations website at
http://global.morningstar.com/US/InvestorRelations in the Corporate Governance
section. Morningstar intends the composition of the Audit Committee, the
attributes of its members, and the responsibilities reflected in its charter to
be in accordance with applicable requirements for corporate audit committees.
The Audit Committee reviews and assesses the adequacy of its charter on an
annual basis. The Board last revised the charter in January 2009.
As described more fully in its charter, the purpose of the
Audit Committee is to assist the Board in its general oversight of Morningstars
financial reporting, audit functions, and internal control over financial
reporting. Management is responsible for preparing, presenting, and maintaining
the integrity of Morningstars financial statements; establishing and
maintaining accounting and financial reporting principles and internal
controls; and following procedures designed to reasonably assure compliance
with accounting standards, applicable laws, and regulations.
Morningstar has a full-time Internal Audit department that
reports to the Audit Committee. This department is responsible for objectively
reviewing and evaluating the adequacy, effectiveness, and quality of
Morningstars system of internal controls relating, for example, to the
reliability and integrity of Morningstars financial information and the
safeguarding of Morningstars assets. Morningstars independent registered
public accounting firm is responsible for performing an independent audit of
Morningstars consolidated financial statements in accordance with the
standards of the Public Company Accounting Oversight Board and expressing an
opinion on the effectiveness of Morningstars internal control over financial
reporting.
The Audit Committee has the authority and responsibility to
select, compensate, evaluate and, when appropriate, replace Morningstars
independent registered public accounting firm. The Audit Committee may engage
its own outside advisors, including experts in particular areas of accounting,
as it determines appropriate.
Among other matters, the Audit Committee monitors the
activities and performance of Morningstars internal and independent auditors,
including the audit scope, external audit fees, auditor independence, and the
extent to which the independent audit firm may be retained to perform non-audit
services. Ernst & Young provided the Audit Committee with the written
disclosures required by applicable requirements of the Public Company
Accounting Oversight Board regarding Ernst & Youngs communications
with the Audit Committee concerning its independence as an independent auditor.
The Audit Committee also discussed Ernst & Youngs independence with
Ernst & Young and management.
The Audit Committee members are not professional accountants
or auditors, and they do not duplicate or certify the activities of management
or the independent audit firm, nor can the Audit Committee certify that the
independent audit firm is indeed independent under applicable rules. The Audit
Committee serves a board-level oversight role. It provides advice, counsel, and
direction to management and the auditors based on the information it receives,
discussions with management and the auditors, and the experience of its members
in business, financial, and accounting matters.
Morningstar, Inc. 2010 Proxy Statement
29
The Audit Committee has an agenda for the year that includes
reviewing Morningstars financial statements, internal control over financial
reporting, and audit matters. The Audit Committee meets each quarter with the
independent audit firm and management to review Morningstars interim financial
results before the publication of Morningstars quarterly earnings press
releases. Management and the independent audit firm review and discuss with the
Audit Committee various topics and events that may have significant financial
impact on Morningstar. Management and the independent audit firm also review
with the Audit Committee matters discussed between them. In addition, the Audit
Committee generally oversees Morningstars internal compliance programs. The
Audit Committee reviews and discusses with management risks relating to the
companys financial systems and data in the context of internal controls and
legal exposure and the steps that management has taken to monitor and control
them. The Audit Committee is responsible for establishing procedures for
handling complaints received by Morningstar regarding accounting, internal
controls, or auditing matters. This includes setting up procedures to allow
Morningstar employees to submit any concerns they may have regarding
questionable accounting or auditing matters in a confidential, anonymous
manner.
In accordance with Audit Committee policy and the
requirements of law, the Audit Committee pre-approves all services to be
provided by the independent audit firm, including audit services, audit-related
services, tax services, and other services. In some cases, the full Audit
Committee provides pre-approval for up to a year, related to a particular
defined task or scope of work and subject to a specific budget. The Audit
Committee has authorized its Chair to pre-approve additional services. If the
Chair pre-approves a service, she reviews the matter with the full Audit
Committee at its next regularly scheduled meeting. To avoid potential conflicts
of interest, the law prohibits a publicly traded company from obtaining certain
non-audit services from its independent audit firm. Morningstar obtains these
services from other firms as needed.
The Audit Committee reviewed and discussed with management
and representatives of Ernst & Young Morningstars consolidated
financial statements for the fiscal year ended December 31, 2009,
managements assessment of the effectiveness of Morningstars internal control
over financial reporting, and Ernst & Youngs evaluation of
Morningstars internal control over financial reporting. Management represented
to the Audit Committee that the consolidated financial statements were prepared
in accordance with U.S. generally accepted accounting principles. Ernst &
Young represented that its presentations included the matters that the Audit
Committee and the independent registered public accounting firm are required to
discuss pursuant to Statement on Auditing Standards No. 61, as amended, Communication
with Audit Committees. This review included a discussion with management of
the quality, not merely the acceptability, of Morningstars accounting
principles; the reasonableness of significant estimates and judgments; and the
clarity of disclosure in Morningstars financial statements, including the
disclosures related to critical accounting estimates. Based on these views and
other discussions, and Ernst & Youngs reports, the Audit Committee
recommended to the Board the inclusion of the audited financial statements in
Morningstars Annual Report on Form 10-K for the year ended December 31,
2009.
Audit Committee
Cheryl Francis, Chair
Steve Kaplan
Bill Lyons
Paul Sturm
Morningstar, Inc. 2010 Proxy Statement
30
___________________________________________________
Principal Accounting Firm Fees
The following tables show the fees that we paid or accrued for
audit and other services provided to us by Ernst & Young LLP, our
principal accounting firm, for fiscal years 2009 and 2008.
|
|
2009
|
|
2008
|
|
Audit Fees
|
|
$794,045
|
|
$770,643
|
|
Audit-Related
Fees
|
|
|
|
|
|
Tax Fees
|
|
846
|
|
5,100
|
|
All Other Fees
|
|
1,995
|
|
4,500
|
|
Total
|
|
$796,886
|
|
$780,243
|
|
Audit Fees
This category includes fees for the audit of our annual
financial statements and the audit of our internal control over financial
reporting, review of financial statements included in our quarterly reports on Form 10-Q,
and services that are normally provided by the independent registered public
accounting firm in connection with statutory and regulatory filings or
engagements for those fiscal years. This category also includes advice on
accounting matters that arose during, or as a result of, the audit or the
review of interim financial statements and statutory audits required in
jurisdictions outside the United States.
Audit-Related Fees
There were no fees for Audit-Related services in 2008 or
2009. The items included in this category consist of assurance and related
services that are normally provided by the independent registered public
accounting firm, including due diligence related to mergers and acquisitions
and accounting consultations and audits performed in connection with
acquisitions.
Tax Fees
This category mainly consists of tax compliance and
consultation services. In 2009, $846 was for assistance with the preparation of
tax returns. In 2008, $5,100 was for assistance with the preparation of tax
returns.
All Other Fees
This category includes the fees paid for a subscription to
an online accounting research tool provided by Ernst & Young.
Morningstar, Inc. 2010 Proxy Statement
31
___________________________________________________
Certain Relationships and Related
Party Transactions
Review and Approval of Related Party Transactions
Our Code of Ethics is designed to help our directors,
executive officers, and other employees address situations that may involve a
conflict of interest. These include situations in which an individuals
personal interests are in conflict with the interests of the company;
situations in which an individual or family member receives personal benefits
as a result of his or her position with the company; and situations that may
otherwise cast doubt on his or her ability to act objectively with or on behalf
of the company.
The Nominating and Corporate Governance Committee Charter
requires that the Nominating and Corporate Governance Committee review
potential conflicts of interests of prospective and current directors. Under
our Corporate Governance Guidelines, if an actual or potential conflict of
interest develops for any reason, including, without limitation, a change in
our business operations or in a directors circumstances, the director should
immediately report that matter to our General Counsel for evaluation. Our
General Counsel has the discretion to report any actual or potential conflicts
to the Chair of the Nominating and Corporate Governance Committee and is
required to report to the Chair all conflicts that would require disclosure as
a related party transaction or involve a relationship with a competitor. If a
significant conflict cannot be resolved, the director may be expected to
resign.
The Audit Committee Charter requires that the Audit
Committee review all related party transactions involving directors and
executive officers. In addition, the Board reviews the independence of each
director on an annual basis. As part of this process, the Board reviews and
discusses information provided by the directors and management about each
directors business and personal activities as they relate to the company.
Related party transactions are disclosed to all directors during this process.
See Board of Directors and Corporate GovernanceIndependent Directors for
additional information about the Boards independence review.
Relationships with Morgan Stanley
As described in the beneficial ownership table beginning on page 14
of this proxy statement, Morgan Stanley holds, on behalf of itself and its
clients for whom it has taken investment discretion, 7.99% of our common stock.
The company has a variety of commercial relationships with Morgan Stanley, the
most significant of which are: we provide equity research to Morgan Stanley, we
provide Licensed Data and Investment Consulting services to Morgan Stanley;
Morgan Stanley licenses a portion of Advisor Workstation; and Morgan Stanley
provides brokerage and execution services related to our stock option program.
We recorded revenue of approximately $9.1 million from Morgan Stanley in 2009.
Deferred Compensation Agreement with Don Phillips
In February 1999, Don Phillips held options to acquire
1,500,000 shares of our common stock with an exercise price of $0.075 per share.
Under the terms of the options, which were granted to him in 1989 and expired
in February 1999, he had the ability to exercise the options at an
aggregate exercise price of $112,500. Rather than require him to exercise the
options and potentially obligate ourselves to repurchase his shares, we entered
into an arrangement with him under which the options granted to him in 1989
were permitted to expire and we granted him new options to purchase 1,500,000
shares of our common stock at an exercise price of $2.77 per share.
To compensate Don for the $2.69 per share increase in
exercise price between his expired and new options, we entered into a deferred
compensation agreement dated February 15, 1999 that obligated us, subject
to certain limitations, to pay him $2.69 for each share of our common stock
that he acquired upon exercise of the options that we granted to him in 1999.
At our election, this payment could be made in cash or shares of our common
stock.
Morningstar, Inc. 2010 Proxy Statement
32
If at the time he became entitled to a payment, the fair
market value of our stock was below $2.77 per share, the amount of deferred
compensation payable to him was reduced proportionately based on the percentage
that the then-current fair market value of a share of our common stock
represented of $2.77. Don exercised the remaining 30,576 options granted to him
in 1999 in early 2009, for which he received total deferred compensation of
approximately $82,250.
Employment of Family Member of Frank Ptak
Jeff Ptak, the son of Frank Ptak, is employed by Morningstar
Investment Services, Inc., a wholly owned subsidiary of the company. Frank
Ptak is a member of our Board of Directors and joined our Board in 2007. He is
not standing for re-election at the annual meeting. In 2009, Jeff received a
base salary of $140,000 and a bonus of $42,469. Also during 2009, Jeff received
a grant of restricted stock units with a value equal to $59,976 at grant, which
vest over a period of four years.
___________________________________________________
Section 16(a) Beneficial
Ownership
Reporting Compliance
Section 16(a) of the Securities Exchange Act of
1934, as amended, requires our directors and executive officers, among others,
to file with the SEC an initial report of ownership of our stock on a Form 3
and reports of changes in ownership on a Form 4 or a Form 5. Persons
subject to Section 16 are required by SEC regulations to furnish us with
copies of all Section 16(a) forms that they file. Under SEC rules,
certain forms of indirect ownership and ownership of company stock by certain
family members are covered by these reporting requirements. As a practical
matter, we assist our executive officers and directors in preparing initial
ownership reports and reporting ownership changes and typically file these
reports on their behalf.
Based solely on a review of the copies of such forms in our
possession, and on written representations from our directors and executive
officers, we believe that during 2009, all of our executive officers and
directors filed the required reports on a timely basis under Section 16(a) with
the following exceptions: Joe Mansueto had one late filing related to a sale of
shares under his Rule 10b5-1 trading plan; Tao Huang had one late filing
related to an option exercise and sale of shares under his Rule 10b5-1
trading plan; and Bevin Desmond had five late filings related to the following
transactions by her spouse: the withholding of shares to satisfy restricted
stock unit tax withholdings obligations on three occasions; an option exercise
and sale of shares; and a sale of shares.
___________________________________________________
Shareholder Proposals or
Nominations
Any proposal that a shareholder wishes to include in our
proxy statement for presentation at our 2011 annual meeting must be received by
us no later than December 9, 2010. The shareholder proposal must be
submitted, along with proof of ownership of our stock in accordance with
Exchange Act Rule 14a-8(b)(2), to our principal executive offices, in care
of our General Counsel and Corporate Secretary, by mail to Richard Robbins,
Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602. We
suggest that the proposal be submitted by certified mailreturn receipt
requested. We strongly encourage any shareholder interested in submitting a
proposal to contact our General Counsel and Corporate Secretary in advance of
this deadline to discuss the proposal. Shareholders may want to consult
knowledgeable counsel with regard to the detailed requirements of applicable
securities laws. Submitting a shareholder proposal does not guarantee that we
will include it in our proxy statement.
Shareholders who intend to nominate a director or present a
proposal at our 2011 annual meeting without seeking to include the proposal in
our proxy statement must provide us notice of the proposal or nomination no
earlier than November 9, 2010
Morningstar, Inc. 2010 Proxy Statement
33
and no later than December 9, 2010. The notice must be
made by a registered shareholder on his or her behalf or on behalf of the
beneficial owner of shares and must include certain information specified in
our by-laws and information as to the shareholders ownership of our stock. You
can view a copy of the by-laws on our Investor Relations website at
http://global.morningstar.com/US/InvestorRelations in the Corporate Governance
section. We reserve the right to reject, rule out of order, or take other
appropriate action with respect to any nomination or proposal that does not
comply with these and other applicable requirements. The proposal or nomination
must be submitted to our principal executive offices, in care of our General
Counsel and Corporate Secretary, by mail to Richard Robbins, Morningstar, Inc.,
22 West Washington Street, Chicago, Illinois 60602. We suggest that the
proposal or nomination be submitted by certified mailreturn receipt requested.
Shareholders may want to consult knowledgeable counsel with regard to the
detailed requirements of applicable securities laws.
The Nominating and Corporate Governance Committee will
review all shareholder proposals and nominations and will make recommendations
to the Board for action on any such proposals or nominations. For information
on recommending individuals for consideration as nominees through our
Nominating and Corporate Governance Committee, see Board of Directors and
Corporate GovernanceNominating and Corporate Governance Committee.
___________________________________________________
Obtaining Our Financial Statements
Our financial statements for the year ended December 31,
2009 are included in our 2009 Annual Report to Shareholders, which we made
available to our shareholders at the same time as this proxy statement.
Additional copies of our 2009 Annual Report and this proxy statement can be
obtained by calling our Investor Relations department at (312) 696-6621. Our
2009 Annual Report and this proxy statement are available on the Internet at
http://global.morningstar.com/US/InvestorRelations.
___________________________________________________
Communicating With Us
We encourage all interested partiesincluding securities
analysts, potential shareholders, and othersto submit questions to us in
writing. If you have a question about our business, please contact us by (1) sending
an e-mail message to investors@morningstar.com, (2) sending a fax to (312)
696-6009, or (3) sending a letter to Morningstar, Inc., Attention:
Investor Relations, 22 West Washington Street, Chicago, Illinois 60602. We will
make written responses to selected inquiries available to all investors at the
same time in Form 8-K reports furnished to the Securities and Exchange
Commission each month.
Our Investor Relations website, located at
http://global.morningstar.com/US/InvestorRelations, contains press releases,
earnings releases, and financial information, as well as corporate governance
information and links to our SEC filings. If you would like to receive
information such as our latest investor information kit or annual report,
please send your request to investors@morningstar.com.
Morningstar, Inc. 2010 Proxy Statement
34
Morningstar, Inc.
22 West Washington Street
Chicago
Illinois, 60602
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VOTE BY INTERNET
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www.proxyvote.com
Use the Internet to
transmit your voting instructions and for electronic delivery of information
up until 11:59 p.m. Eastern Time the day before the meeting date. Have
your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
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MORNINGSTAR, INC.
22 WEST WASHINGTON STREET
CHICAGO, IL 60602
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ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
If you would like to
reduce the costs incurred by Morningstar, Inc. in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy
cards, and annual reports electronically via e-mail or the Internet. To sign
up for electronic delivery, please follow the instructions above to vote
using the Internet and, when prompted, indicate that you agree to receive or
access proxy materials electronically in future years.
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VOTE BY PHONE
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1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 p.m.
Eastern Time the day before the meeting date. Have your proxy card in hand
when you call and then follow the instructions.
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VOTE BY MAIL
Mark, sign, and date
your proxy card and return it in the postage-paid envelope we have provided
or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
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TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M21951-P90832
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KEEP THIS PORTION
FOR YOUR RECORDS
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DETACH AND RETURN
THIS PORTION ONLY
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THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED.
MORNINGSTAR, INC.
The Board
of Directors recommends you vote
FOR the following proposals:
1. Election of Directors
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For
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Against
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Abstain
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1a. Joe
Mansueto
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o
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o
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o
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For
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Against
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Abstain
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1b. Don
Phillips
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o
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o
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o
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2.
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Ratification of
the appointment of Ernst & Young LLP as Morningstars independent
registered public accounting firm for 2010.
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o
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o
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o
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1c. Cheryl
Francis
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o
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o
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o
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1d. Steve
Kaplan
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o
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o
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o
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1e. Bill
Lyons
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o
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o
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o
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1f. Jack
Noonan
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o
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o
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o
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1g. Paul
Sturm
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o
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o
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o
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1h. Hugh
Zentmyer
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o
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o
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o
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Yes
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No
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Please
indicate if you plan to attend this meeting.
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o
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o
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Please
sign your name(s) as it appear(s) on this proxy. When signing as
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attorney,
executor, administrator, corporate officer, trustee, guardian,
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or
custodian, please give your full title.
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Signature [PLEASE SIGN
WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com.
Proxy
MORNINGSTAR, INC.
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Proxy
for Annual Meeting of Shareholders
May 18,
2010
9:00 A.M.
This
proxy is solicited by the Board of Directors for use at the Annual Meeting on
May 18, 2010.
The
shares of stock you hold in this account will be voted as you specify on the
reverse side.
If no
choice is specified, the proxy will be voted FOR Items 1 and 2 and in the
discretion of the proxyholders on any other matter that properly comes before
the meeting.
By
signing the proxy, you revoke all prior proxies and appoint Scott Cooley and
Richard Robbins, or either of them, with full power of substitution to vote these
shares on the matters shown on the reverse side and any other matters as may
properly come before the Annual Meeting and all adjournments.
Continued
and to be voted on reverse side
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