GovernanceMetrics International
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March 16, 2007
GMI Policy Changes - Client Note
Dear Valued Client,
GMI always strives to ensure it is providing the highest quality ratings reports on those companies of most relevance to you. As you know, for U.S. companies, GMI covers all companies in the S&P 500, S&P MidCap 400, S&P SmallCap 600 and Russell 1000 Index. Generally, we do not remove companies from coverage unless the company has been removed from an index as the result of a takeover or delisting. However, some companies decline in market cap to the extent that they are no longer in any of these indexes and are unlikely to return in the short to medium term. As a result of a review of our company coverage policy, we have determined to remove U.S. companies from our ratings universe if they have been out of the indexes for at least six months and have a market cap of US$200M or less, which is substantially below the minimum requirement for the lowest reaching index we cover, the S&P SmallCap 600, which is US$300M. We trust you will find this change in policy will ensure we continue to cover the companies you are most interested in.
GMI has also amended its director independence guidelines to reflect recent changes in the U.S. Securities and Exchange Commission’s (SEC) reporting requirements on related party transactions. The SEC has increased the threshold under Item 404 of Regulation S-K for reporting related party transactions from US$60,000 to US$120,000. This means that companies will only need to disclose these transactions when they total more than US$120,000. Despite opposition from the investment community, the SEC confirmed this change and it is now in place. Therefore, as we rely on these disclosures in our analysis, GMI has determined to increase its director independence related party transaction threshold to US$120,000. We have attached the updated guidelines for your information, which have also been added to our subscriber site.
Thank you as always for your continuing support of GMI.