That's what Michelle Leder has done this morning at footnoted.com, and it must be awkward as hell. Michelle and her staff normally pore through the SEC filings of public companies in search of revealing and often not-so-flattering information about executive compensation, corporate governance, severance payments, and the like. Well, footnoted was bought several few years ago by the financial data company Morningstar, which is a public company - and a Morningstar shareholder has filed a resolution challenging Joe Mansueto's role as founder, chairman, primary stockholder, and CEO. From a corporate governance standpoint, this arrangement is far from ideal. The resolution states that:
The Corporate Library, an independent investment research firm, said there were ongoing concerns regarding our company's board composition and its ownership profile. Five of 8 board members had 12 to 27-years tenure. This included four directors who have served for the same 12 years and CEO and Chairman Joe Mansueto, who founded the company and has served on the board since the company's inception in 1984.
Morningstar says that the arrangement is not only fine, but best serves the company. Here's where Leder, writing on the footnoted site, picks things up:
For the past 7 years, Morningstar has been issuing stewardship grades for stocks, and one of the key components of that grade is whether the company's chairman and CEO is the same person. According to the grading system, companies that don't split the role should have "a lead independent director that can actively challenge the authority of the chairman/CEO." Morningstar does not have a lead director. We've found a number of recent examples where Morningstar analysts gave companies low stewardship grades at least in part because of this dual role.
Writing about one's parent company is always a little awkward, though Morningstar has been good about maintaining our editorial independence since it acquired footnoted just over two years ago. In this case, given how closely we watch the governance practices of other companies, we felt it was important to look at Morningstar's proxy with the same skepticism we would any other company's.