ASM 2021 Part 1

May 14, 2021

Slides

Good morning, everyone. Welcome. Welcome to the 2021 Morningstar Annual Shareholder Meeting. I'm Joe Mansueto, Chairman of the Board, and I'm delighted you could join us here this morning. Now, like most public companies, we're holding this meeting virtually due to the COVID-nineteen pandemic. And while we miss seeing everyone in person, we're very excited that virtual capabilities allow all of you to join and participate in this meeting, without that time and expense of travel. So we're presenting to you today from our Chicago headquarters, which is a step forward from last year when we all presented from our homes. And we look forward to welcoming you to our offices next year, for those of you who wish to travel, to be with us in person. I hope everyone has been healthy and safe over the past year during the pandemic, and our hearts certainly go out to anyone who's been negatively affected by the virus. It's certainly, I think as we know, been a very challenging year for the entire world. So the format of our meeting is identical to prior years with some added technological capabilities, which I'll detail as we go along. But first, take a moment to read our safe harbor statement. There it is. And we have 3 main parts to today's meeting. The first is the official business of the meeting, which I don't think will take too long. Then we'll move to the next part of the meeting, which are presentations, and that will be followed by our question and answer period. Now if you have questions you'd like us to address during the Q and A portion of the meeting, you'll have an opportunity to ask them via the questions text box in the Broadridge platform or via chat or through audio or video participation if you're joining through the Zoom platform. So even though our meeting is virtual, we look forward very much to your questions. I would note that if you would like to vote during the official part of the meeting, You must be logged on to the Broadridge platform using your control number provided with your proxy materials. The meeting is being simulcast on both platforms, so all participants will be able to hear and watch the meeting in its entirety. So now I'd like to get started with the official business of the meeting. Greg Malatia, a representative of Broadridge Financial Services, is here today to act as the Inspector of Elections. Pat Maloney, our General Counsel and Corporate Secretary, We'll now report on the mailing of the notice of the meeting and the number of shares represented at today's meeting. Thank you, Joe. We are holding this meeting pursuant to a notice mailed on April 1 to each shareholder of record on March 15. A certified copy of the list of shareholders of record has been available at our offices for the last 10 days. I can report that we have established a quorum for Conduct of business at this meeting. Thank you, Pat. So the first item of business today is the election of our directors. We will elect, 10 directors at today's meeting. The directors elected today will hold office until the 2022 Annual Shareholders Meeting or until their resignation or removal. The nominees for Directors, you see them on the screen here, are Robin D'Amante, Cheryl Francis, Steve Joint, Steve Kaplan, Kunal Kapoor, Gail Landis, Bill Lyons, Danielle Sutton, Carolyn Tsai and myself, Joe Mansueto. The second item of business is the approval of the Morningstar amended and restated stock incentive plan. Our Board believes the continuation of our long term equity incentive compensation program allows us to align the interests of our employees and directors with those of our shareholders. The 3rd item of business is the say on pay vote. Each year, we ask our shareholders to vote on an advisory basis to approve the compensation of our named executive officers as described in our proxy statement. The goals of our executive compensation program are to attract and retain talented executives and to motivate and reward them for their contributions to our company. Here you see our named executive officers. And then the 4th item is, the ratification and the appointment of KPMG as our independent auditors for 2021. The Board recommends a vote, for each of these proposals. So the 5th item of business is a shareholder proposal we received from the Jay Lenz Investor Network. I think there's a representative, from J. Lens here to present that. I'll ask our production team to turn on that representative's line. Thank you. My name is Julie Hammerman, and I'm here today representing J. Lend, a network of Jewish institutional investors, to ask the Board for your moral leadership on an issue of great importance to our investor network. Following the 2020 acquisition of Sustainalytics, Morningstar is now actively promoting a discriminatory political campaign called BDS, Short for boycott, divest, sanction Israel. In 2019, the US Congress overwhelmingly condemned BDS and declared that in contrast To protest movements that have sought racial justice and social change, the global BDS movement targeting Israel is not about coexistence, Civil rights and political reconciliation, but about undermining the very legitimacy of Israel. The German parliament, along with other countries, have declared BDS The antisemitic movement. Morningstar's promotion of BDS has real world consequences. When Morningstar's engagement services pressures global companies To cease sales to the Israeli military, Morningstar aims to make it harder for Israel to protect citizens from ongoing violence. When Morningstar's ESG research uses BDS activist sources to justify elevating a company's controversy score, Morningstar is conducting economic warfare on companies with ties to Israel. Jaylen's first raised Sustainalytics promotion of BDS in 2016, But at the time, Sustainalytics was owned by PGGM, a Dutch pension that supports BDS. In April 2020, JLNS reached out to Morningstar's CEO to Express concerns about the acquisition of Sustainalytics. After Jaylen's filed a shareholder resolution in 2021, Morningstar finally released a statement but claimed an internal review found JLEN's claims to be false. It's ironic that a company dedicated to objective analysis Other companies would declare JLN's concerns false without an independent review and despite significant evidence of Sustainalytics' prolonged BDS activity. Among Morningstar's peers and competitors that provide similar investment research services, Morningstar stands alone In your active advocacy on behalf of BDS and your company's failure to acknowledge and address this issue. As shareholders today, we ask the board To consider on behalf of all investors, the legal, reputational and financial risks associated with the incorporation of BDS and the company's business lines, Especially as many states, including Illinois, have passed measures against companies like Morningstar that support BDS. We recognize that this resolution was not included on your proxy statement this year and that most shareholders have already voted without an opportunity to support this resolution. However, the only vote that matters on this resolution is a vote by the Board today on whether you will fulfill the request in this resolution and provide overdue transparency on this concern to your investors. Thank you. Thank you, Julie. Investment research that is independent and unbiased is really the foundation of Morningstar. So whenever anyone questions that, we take it very seriously and we seek to engage with that party to understand their questions and evaluate their concerns. And we did engage with J. Lens, but they did not offer any specifics in our research, that drove their conclusions, nor did they respond to our offers to constructively reengage on this topic. We did, however, undertake our own investigation of their concerns, and we found no evidence of any bias. We've published a summary of our findings on this topic on our corporate website, and I'd encourage you all to take a look at that. Our Board of Directors consequently then has unanimously recommended that our stockholders vote against this proposal. There is no further business scheduled to come before this meeting, so I now declare the polls open. If you are a shareholder, You may use the vote here button on the lower right portion of the screen to vote your shares at this time. If you wish to vote on the shareholder proposal, Please use the other business text box in the lower left portion of the screen and then type for against or abstain before clicking submit. Please remember that if you've already sent in your proxy, or voted by the Internet, Your shares have been voted accordingly. You did not need to vote today unless you are voting for the first time, you want to change your previous vote or you'd like to vote on the other business. If anyone has a question or a statement related to the proposals, please utilize the Ask a Question field in the lower left portion of your Broadridge window or via chat and Zoom. As I mentioned, there will also be a general question and answer session later in the meeting, so at this time, we'll only take questions that are related to the proposals. Any questions on the proposals? Well, hearing none, I now declare that the polls are closed. Pat, will you please report on the voting results? The Inspector of Election has advised me that more than a majority of shares Represented in person or by proxy and entitled to vote at this meeting have been voted for each of the director nominees listed in our proxy statement To approve the amended and restated 2011 stock incentive plan in favor of our compensation for our named executive officers And to ratify the appointment of KPMG. I've been advised that the shareholder proposal has not received the approval of a majority of the shares voted And therefore, is not adopted. We will file an 8 ks with more detailed voting results in the next couple of days. Thank you, Pat. So this concludes the formal business portion of our annual meeting. But before we sign off on this part of the meeting, I have a few final comments. First, I want to thank Jack Noonan for his more than 20 years of service on our Board. Jack reached our Director Retirement age this year and so did not stand for reelection. Jack has just been an outstanding director over the last couple of decades. He gave our management Team, insightful advice and guidance during his tenure. So thank you, Jack, for all of your contributions to Morningstar's growth. You will be missed. At the same time, I want to welcome Danielle Sutton to our Board. Danielle is the Chief People Officer of Fastly, a leading provider of global cloud platform services, Danielle offers a wealth of experience in human capital management, Global Business Expansion and Executive Development. Danielle's experience at rapidly growing technology companies We'll provide our Board with unique insights on strategies supporting scale and growth. So I want to give a very warm welcome to Danielle. And then finally, I want to thank Kunal Kapoor, our CEO, our management team, and all the staff at Morningstar for doing such incredible work Over the past year during the pandemic, everyone worked extremely hard to transition the company to a work from home environment while continuing to deliver the highest quality data, research and ratings to investors without any interruptions. Our clients look to us to help navigate the uncertainty and volatility of the last year, which there was a lot, And we were there for them, 24x7. So on behalf of our shareholders, I want to thank everyone at Morningstar for all of your very admirable efforts. They're much appreciated. So, now we'll begin the management presentations, followed by a question and answer session. We'll hear first from our CEO, Kunal Kapoor then our CFO, Jason Dubinsky and then Michael Jansy, CEO of Sustainalytics, a business Morningstar acquired. Thank you very much for joining us this morning. It's terrific having all of you as our shareholders.