New York - July 22, 2010 Adam Kommel, Research Analyst
In last year's high-profile proxy fight between Terra Industries Inc. and CF Industries Holdings, Inc.,
proxy advisory firms RiskMetrics (Institutional Shareholder Services) and Glass, Lewis & Co. arrived at opposite
recommendations: RiskMetrics supported dissident CF, while Glass Lewis supported Terra (CF's three-person slate was
elected to the nine-member classified board, and a sweetened bid several months later allowed it to finally acquire
the company, after a long and protracted campaign).
RiskMetrics' recommendations are reliably more dissident-friendly than Glass Lewis'.
Out of all proxy fights for board seats at U.S.-incorporated companies since the beginning of 2006,
RiskMetrics supported the dissident slate in 40% of contests where a RiskMetrics recommendation was publicly available,
while Glass Lewis favored the dissident slate in only 20% of fights where a Glass Lewis recommendation was publicly
available. (Recommendations are recorded in the FactSet SharkWatch database only if they are made publicly available,
usually through a dissident or company press release or a news article. About three-quarters of proxy fights that go to
a meeting have publicly available recommendations from at least one (and usually both) of the two largest proxy advisory
firms, although this study draws from proxy fights that did not reach a vote, as well.)
RiskMetrics and Glass Lewis came up with opposite recommendations in 17% of fights in which both recommendations are public.
In all 21 cases, RiskMetrics backed the dissident while Glass Lewis favored management. In not one case did Glass Lewis
favor the dissident slate while RiskMetrics supported management. (RiskMetrics and Glass Lewis supported the same sides
in 74% of applicable fights; the remaining 9% involve split recommendations.)
For proxy fights in which either the dissident or management clearly won (excluding "split" outcomes, or partial victories),
management won two-thirds of contests. United support from both RiskMetrics and Glass Lewis brought management's
success rate to 81% and pushed up the dissident success rate to 71%. For the 21 fights in which RiskMetrics and
Glass Lewis differed on their recommendations (always RiskMetrics for dissident and Glass Lewis for management),
management won seven contests, while dissidents won nine. Three fights were partial dissident victories and two were
settled prior to the meeting.