DEF 14A 1 a21-2384_2def14a.htm DEF 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

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Morningstar, Inc.
(Name of Registrant as Specified In Its Charter)


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Notice of 2021 Annual Meeting
and
Proxy Statement

Letter from Joe Mansueto, Executive Chairman and Chairman of the Board, and Kunal Kapoor, Chief Executive Officer

Notice of Annual Meeting

Proxy Statement

01	Proxy Statement Summary

04	Proposal 1: Election of Directors

07	Board of Directors and Corporate Governance

14	Security Ownership of Certain Beneficial Owners and Management

15	Compensation Discussion and Analysis

25	Compensation Committee Report

26	Executive Compensation

30	Equity Compensation Plan Information

31	Proposal 2: Approval of the Morningstar, Inc. Amended and Restated 2011 Stock Incentive Plan

42	Proposal 3: Advisory Vote to Approve Executive Compensation

43	Proposal 4: Ratification of the Appointment of Independent Registered Public Accounting Firm

44	Audit Committee Report

46	Principal Accounting Firm Fees

47	Certain Relationships and Related Party Transactions

47	Delinquent Section 16(a) Reports

48	Shareholder Proposals or Nominations

48	Obtaining our Financial Statements

49	Communicating With Us

49	Questions and Answers About the Annual Meeting and the Proxy Materials

53	Appendix

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April 1, 2021

Dear Fellow Shareholders:

At Morningstar, our mission is to empower investor success and that extends to you, our fellow shareholders. Foundational to your empowerment is a clear understanding of our strategy and priorities. We encourage you to read our shareholder letter that accompanies the annual report for a full review of Morningstar’s accomplishments in 2020 and strategic initiatives for 2021, but also wanted to take this opportunity to share with you some notable priorities for our Board of Directors.

Despite the challenges of 2020, Morningstar demonstrated its resilience and reported excellent financial results and growth across its product areas. The Company offered a steady hand to investors and issuers of all types through turbulent markets. We not only grew our core product areas but expanded with the acquisition of Sustainalytics in July 2020. As we continue to integrate Sustainalytics, we are excited about new ways to incorporate environmental, social and corporate governance (ESG) data and insights across Morningstar’s existing research and solutions. We explore this in greater detail in our discussion of our focus areas in 2021 below.

Morningstar employees continued to perform excellently despite the disruptions of the COVID-19 pandemic. They supported each other and our customers with ingenuity, integrity and empathy as everyone adjusted to new demands and volatile markets. We are grateful for the leadership we have seen from our teams around the world. It’s been truly inspiring to watch Morningstar’s employee engagement and community outreach increase in such a uniquely challenging year.

Over the past year, the Board has focused on a number of important initiatives:

· Refreshing Board Composition—With leadership from our Nominating and Corporate Governance Committee, we undertook a comprehensive search for candidates whose skill sets could complement and further strengthen the Board’s diverse set of perspectives, deep business experience, and the expertise to drive sound corporate governance practices. We are excited to nominate Doniel Sutton to the Board and believe her experience at fast-growing technology companies will provide valuable insights to our management on long-term growth initiatives. This year we bid farewell to Jack Noonan as he approaches his retirement from the Board. His expert guidance over 20 years of service on the Board will be missed and we thank him for his commitment to Morningstar.

· Supporting Our People—In recognition of the uncertainty brought on by the COVID-19 pandemic, we thought it was important to reinforce to employees that we are all in this together. Accordingly, with the leadership of our Compensation Committee, we agreed to adjust the weightings of the Company’s bonus plan to place a heavier weight on Morningstar’s overall performance rather than that of specific business units. We also balanced the weightings attributable to revenue and EBITDA in recognition that a focus on both growth and profitability would be needed to weather 2020’s market conditions. Furthermore, the Compensation Committee preserved some flexibility in determining some of the metrics associated with the market stock units awarded to our executive leadership while retaining their customary link to total shareholder return.

· Ensuring Our Technology Security and Resilience—Our Audit Committee showed leadership with a keen focus on technology and information security across our global company. Managing connectivity for a remote workforce and ensuring seamless accessibility for our customers around the world becomes even more complex in the face of increasingly sophisticated cybersecurity attacks. Our ability to deliver powerful insights and efficient tools to investors depends on our ability to maintain our technological infrastructure and keep our information secure.

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· Refining Board Governance Practices—Our Board undertook a comprehensive review of its own processes to evaluate the scope of each of our three Committees and the Board as a whole. The purpose was to ensure that our directors’ time was spent effectively on topics that align with the Company’s goals and priorities. Our directors have valuable and varied experiences which can provide the best insight when meetings are comprised of discussion and debate, rather than repetitive administrative items. We reviewed corporate best practices to evaluate where certain topics could be transitioned from one Committee to another in order to provide better focus and attention to important areas. Our Board plans to repeat this review periodically so that it can continue to guide and support Morningstar’s growth.

Looking forward to 2021, we are excited for what Morningstar has to offer as it continues to evolve. A key milestone this year is the publication of our first corporate sustainability report in the second quarter of 2021. Our commitment is to ensure the sustainability of our firm’s practices, recognizing the importance of this work to our stakeholders, colleagues, and their families and the communities in which they live.

Our Board supports the Company’s strategic initiatives, providing oversight and guidance to its management team. Areas of particular focus in 2021 include:

· Establishing a Leading ESG position—As a global financial services business, we are helping to integrate ESG data into our research, tools, and services to make investing more accessible and relevant to individuals; to support sustainable capital markets; and to improve transparency for investors. The Company provides meaningful ESG and sustainability insights to investors at a time when sustainability-related data is a critical part of investment decisions. We integrate ESG across the investment spectrum and deliver a single market standard for assessing ESG risks and opportunities across asset classes. Each of Morningstar’s product areas are focused on developing leading ESG content, building innovative ESG products and delivering ESG data sets that empower investor success.

· Investing in Our People—As a global employer, Morningstar is committed to turning the power of our own ESG research lens on ourselves. We focus on ESG indicators that are material to Morningstar’s product areas, particularly corporate governance, business ethics, and diversity, equity, and inclusion. We embrace the research that indicates that diverse teams make better decisions and that innovation thrives in a culture of transparency. Additionally, we recognize that climate change and the environment are top concerns for our colleagues; we seek to reduce our impact on the environment while expanding the growth of our product areas and the reach of our products.

This is by no means an exhaustive list; they are just some of the ways we are creating a Company built with independence, integrity, and empowerment as top priorities.

We will hold our 2021 Annual Shareholders’ Meeting at 9 a.m. Central time on Friday, May 14, 2021 as a virtual meeting. While we will miss seeing you in person, we are excited that the virtual capabilities afford more shareholders the ability to attend without the time and expense for travel. Your vote is very important to us. We strongly encourage you to read both our proxy statement and annual report in their entirety and ask that you support our Board’s recommendations.

On behalf of the Board of Directors, we look forward to working with you, and serving you, in the years to come. We sincerely appreciate your continued support of Morningstar.

Sincerely,



Joe Mansueto		Kunal Kapoor
Executive Chairman and Chairman of the Board		Chief Executive Officer

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Morningstar, Inc.
Notice of Annual Shareholders’ Meeting
To be held on May 14, 2021

April 1, 2021

Dear Shareholder:

You are cordially invited to attend our 2021 Annual Shareholders’ Meeting, which will be held at 9 a.m. Central time on Friday, May 14, 2021. In order to facilitate participation from our shareholders around the world, our annual meeting will be webcast live. For further details, please see the “Proxy Statement Summary” on the second following page.

We are holding the annual meeting for the following purposes:

· To elect the ten director nominees listed in the proxy statement to hold office until the next annual shareholders’ meeting and until their respective successors have been elected and qualified.

· To approve the Morningstar, Inc. Amended and Restated 2011 Stock Incentive Plan.

· To hold an advisory vote to approve executive compensation.

· To ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2021.

· To transact other business that may properly come before the meeting or any adjournment or postponement of the meeting.

The proxy statement, which follows this notice, fully describes these items.

You may vote at the meeting and any postponements or adjournments of the meeting if you were a shareholder of record as of the close of business on March 15, 2021, the record date for the meeting. A list of shareholders entitled to vote will be available for inspection for 10 days prior to the meeting 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. For further details, please refer to the question “How do I vote?” on page 51. If you have any questions concerning the meeting or the proposals, please contact our Investor Relations department at investors@morningstar.com.

Patrick J. Maloney

General Counsel and Corporate Secretary

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Caution Concerning Forward-Looking Statements

This proxy statement contains, and statements made by Morningstar and its representatives at the annual meeting may contain forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations about future events or future financial performance. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “prospects,” or “continue.” These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur or to differ significantly from what we expect. We describe risks and uncertainties that could cause actual results and events to differ materially in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk” sections of our Forms 10-K and 10-Q. If any of these risks and uncertainties materialize, our actual future results may vary significantly from what we expected. We do not undertake to update our forward-looking statements as a result of new information or future events.

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Proxy Statement

Proxy Statement Summary

This summary highlights key elements of our proxy statement. For more complete information, you should review the entire proxy statement along with our 2020 Annual Report.

Annual Meeting Information

Date:		May 14, 2021
Time:		9:00 a.m. Central Time
Where:		Shareholders may view and listen to a live webcast of the meeting, vote their shares electronically during the meeting, and submit written questions during the meeting by visiting www.virtualshareholdermeeting.com/MORN2021.
		Other participants may view and listen to a live webcast of the meeting and submit written questions or ask them live via webcam during the meeting by registering in advance at https://shareholders.morningstar.com in the Events & Presentations section of the Investor Relations area of our corporate website. Participants electing this option will not be able to vote during the meeting.
Record Date:		March 15, 2021

Annual Meeting Proposals and Board Recommendations

Proposal	Board Recommendation	More Information
Proposal 1: Election of Directors	FOR the election of each of the director nominees listed in this proxy statement	Page 4
Proposal 2: Approve the Morningstar, Inc. Amended and Restated 2011 Stock Incentive Plan	FOR the approval of the Morningstar, Inc. Amended and Restated 2011 Stock Incentive Plan	Page 31
Proposal 3: Advisory Vote to Approve Executive Compensation	FOR the approval of the resolution relating to the executive compensation of our named executive officers as disclosed in this proxy statement	Page 42
Proposal 4: Ratification of the Appointment of Independent Registered Public Accounting Firm	FOR the ratification of the appointment of KPMG as our independent registered public accounting firm for 2021	Page 43

In addition, a shareholder has notified us of its intent to propose a resolution at the meeting requesting that the board prepare a report on the extent of potential legal, financial, and reputational risks associated with economic activism against Israel alleged in Morningstar’s business lines. This shareholder proposal is referred to as the “Floor Proposal.” The Floor Proposal was not submitted under Rule 14a-8 under the Securities Exchange Act of 1934 (Exchange Act), and the shareholder did not seek to have the Floor Proposal included in this Proxy Statement. Accordingly, the Floor Proposal may be presented at the meeting, but is not included in this Proxy Statement. If the Floor Proposal is presented at the annual meeting, the proxy holders will have, and intend to exercise, discretionary voting authority under Rule 14a-4(c) under the Exchange Act to vote AGAINST the Floor Proposal.

Morningstar, Inc. 2021 Proxy Statement

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2020 Financial Highlights

We approached $1.4 billion in revenue and delivered solid growth in operating income, operating cash flow, and free cash flow in 2020 while navigating a uniquely challenging year. Capital allocation was fairly balanced in 2020. We repurchased $41.9 million of our stock and distributed $51.4 million in dividends, representing a dividend payout ratio of 23.0%. We also allocated $67.8 million (net of cash acquired) toward M&A, including the July acquisition of Sustainalytics. In 2020, we took advantage of favorable interest rates and completed the issuance and sale of $350.0 million aggregate principal amount of 2.32% senior notes due October 26, 2030 in a private placement, the first such debt offering in Morningstar’s history. Proceeds were primarily used to pay off a portion of the Company’s outstanding debt under its credit agreement, and, in combination with other discretionary repayments, resulted in a net debt reduction of $63.4 million for the year. For a more detailed discussion of our financial performance, see our Annual Report on Form 10-K for the year ended December 31, 2020.

Executive Compensation Highlights

Our compensation programs and practices are designed to create incentive opportunities for advancing our shareholders’ long-term interests. The compensation decisions for our executives made for 2020 reflected a continuing emphasis on variable incentives with increases limited to our named executive officers’ equity targets. In 2020, we changed certain aspects of our incentive plan design due to the uncertain market environment caused by the COVID-19 pandemic. The bonus payouts to our named executive officers reflected the achievement of financial goals, in addition to adjustments made for individual performance.

Our Board of Directors

Other than Jack Noonan, who is not standing for re-election in accordance with our director retirement policy, each of our current directors is standing for election to hold office until the annual meeting to be held in 2022 and until his or her successor, if any, is elected and qualified. A new nominee, Doniel Sutton, is also standing for election at the annual meeting. The table below provides summary information about our 10 director nominees.

Name	Age	Director Since	Primary or Former Occupation	Independent	Other Public Company Boards
Joe Mansueto	64	1984	Executive Chairman and Chairman of the Board of Morningstar, Inc.
Kunal Kapoor	45	2017	Chief Executive Officer of Morningstar, Inc.
Robin Diamonte	56	2015	Chief Investment Officer of Raytheon Technologies Corp.	ü
Cheryl Francis	67	2002	Co-Chair of Corporate Leadership Center	ü	2
Steve Joynt	69	2019	Former Chief Executive Officer of DBRS
Steve Kaplan	61	1999	Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at The University of Chicago Booth School of Business	ü
Gail Landis	68	2013	Founding Partner of Evercore Asset Management, LLC	ü
Bill Lyons	65	2007	Former President and Chief Executive Officer of American Century Companies, Inc.	ü	1
Doniel Sutton	47	Nominee	Chief People Officer at Fastly, Inc.	ü	1
Caroline Tsay	39	2017	Chief Executive Officer of Compute Software, Inc.	ü	1

Our Board is responsible for providing oversight, counseling, and direction to our management team in the long-term interest of the Company and our shareholders. The Board believes that the 2021 nominees are of an appropriate composition to effectively oversee and constructively challenge the performance of management in the execution of our strategy. Detailed information about each nominee’s background, skills, and experience can be found beginning on page 4.

Our nominees’ tenure and diversity are well-distributed to create a balanced Board, which contributes to a rich dialogue representing a range of perspectives.

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Corporate Sustainability Highlights

Corporate sustainability and the integration of ESG data, research, tools and services across the Morningstar enterprise is a priority for the Company and for the Board. While serving on the Board, our directors have become familiar with the ESG and sustainability landscapes, including best practices related to ESG programs and strategy development. Given its critical importance to the Company’s product areas, oversight of ESG and sustainability-related matters at the Board level has not been assigned to a specific Committee. Instead, ESG integration and Company sustainability efforts are weaved into a variety of agenda items at Board and Committee meetings. For example, one of our CEO’s goals is to build an inclusive culture that drives exceptional talent engagement and development and the Company’s progress toward this goal is reviewed by our Nominating and Corporate Governance Committee at each meeting. Since another goal for 2021 is to establish a leading ESG position across each Morningstar business, sustainability is included as a key area of focus during the Board’s review of each business. The Board provides oversight and guidance on risk analysis and mitigation, succession planning for key executives and compensation policies among other topics, which demonstrate the importance that the Board places on ESG considerations.

Corporate Governance Highlights

We are committed to sound corporate governance. Our Nominating and Corporate Governance Committee regularly reviews our governance practices in the context of current corporate governance trends, regulatory changes, and recognized best practices. The following chart highlights our significant corporate governance policies and practices:

70% of directors are independent		Annual board meeting focused on company strategy
Diverse board that provides a range of viewpoints		Annual board and committee self-evaluations
Annual election of directors		Retirement age policy for directors
Majority vote standard		Proxy access rights
Regular executive sessions of independent directors		Shareholder right to call special meetings
Directors not “over-boarded”		Policy against hedging company stock

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Proposal 1:

Election of Directors

Our nominees for election as directors include seven independent directors, as defined in the applicable rules for companies traded on the Nasdaq Global Select Market (Nasdaq), two members of our senior management team, and the retired former chief executive officer of DBRS, the credit rating agency we acquired in 2019. Each director serves a one-year term, as described below, with all directors subject to annual election. All of the nominees, except for Doniel Sutton, are currently directors.

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 14, 2021 and ending with the annual meeting to be held in 2022 and until his or her successor, if any, is elected and qualified. Unless proxy cards are otherwise marked, the persons named as proxy holders 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 proxy holders may vote either for a substitute nominee designated by the 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. We describe certain individual qualifications and skills that led the Board to conclude that each person should serve as a director below.

Name	Age	Position
Joe Mansueto	64	Executive Chairman and Chairman of the Board
Kunal Kapoor	45	Chief Executive Officer and Director
Robin Diamonte	56	Director
Cheryl Francis	67	Director
Steve Joynt	69	Director
Steve Kaplan	61	Director
Gail Landis	68	Director
Bill Lyons	65	Director
Doniel Sutton	47	Director Nominee
Caroline Tsay	39	Director

Joe Mansueto

Joe Mansueto founded Morningstar in 1984 and became executive chairman in 2017. He has served as chairman since our company’s inception and as chief executive officer from 1984 to 1996 and from 2000 to 2016. He holds a bachelor’s degree in business administration from The University of Chicago and a master’s degree in business administration from The University of Chicago Booth School of Business. He formerly served on the board of directors of Whole Foods Market, Inc., prior to its acquisition by Amazon.com, Inc.

As the founder and largest shareholder of the company, Joe’s knowledge of all aspects of the business and the financial information industry position him well to serve as executive chairman of the company and chairman of the Board.

Kunal Kapoor

Kunal Kapoor is chief executive officer of Morningstar and was appointed to the Board in January 2017. Before assuming his current role in 2017, he served as president, responsible for product development and innovation, sales and marketing, and driving strategic prioritization across the firm. Before becoming president in 2015, Kunal was head of global products and client solutions. Kunal became head of our global client solutions group in 2013 and took on additional responsibility for the products

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group in February 2014. For part of 2013, he was president of our Data Division, and from 2010 until 2012, he was president of Equity and Market Data/Software. In 2009 and 2010, he was president of Individual Software. Kunal joined Morningstar in 1997. Kunal was appointed to the board of directors of Wealth Enhancement Group, a privately-owned independent wealth management firm, in February 2021.

Kunal holds a bachelor’s degree in economics and environmental policy from Monmouth College and a master’s degree in business administration from The University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst (CFA) designation.

Since he joined the company, Kunal has worked in leadership roles in almost every area of the company, currently serving as chief executive officer. As a result, he is uniquely able to advise the Board on the opportunities and challenges of managing the company and its strategy for growth, as well as its day to day operations and risks.

Robin Diamonte

Robin Diamonte was appointed to the Board in December 2015. She is the chief investment officer of Raytheon Technologies Corp., the aerospace defense company formed in 2020 from the merger of Raytheon Corporation and the United Technologies Corporation aerospace business. Robin had been vice president and chief investment officer at United Technologies Corporation since 2004. Before joining United Technologies Corporation, she held several positions during her 12-year tenure at Verizon Investment Management Corporation, the asset management arm of Verizon Communications Inc., rising from research analyst to managing director. She holds a bachelor’s degree in electrical engineering and a master’s degree in business administration from the University of New Haven.

As the chief investment officer of Raytheon Technologies Corp. overseeing $115 billion in global retirement assets, Robin has extensive experience in the retirement industry. Her expertise is a great asset to our retirement services business.

Cheryl Francis

Cheryl Francis was elected to the Board in July 2002. She has been co-chair of Corporate Leadership Center, a not-for-profit organization focused on developing tomorrow’s business leaders, since August 2008 and vice-chair 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 Aon plc. She holds a bachelor’s degree from Cornell University and a master’s degree in business administration from The University of Chicago Booth School of Business.

Cheryl 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 Securities and Exchange Commission (SEC) rules.

Steve Joynt

Steve Joynt was appointed to the Board in December 2019. He served as chief executive officer of DBRS, the global credit ratings agency acquired by Morningstar in July 2019, where he spent three years directing the global vision, mission, and strategic objectives for DBRS. Prior to that, he spent more than 20 years at the global credit ratings agency Fitch Group in a variety of roles, including as the company’s chief executive officer from 2002 to 2012. Earlier in his career, Steve spent 12 years at Standard & Poor’s in a variety of analytical roles, culminating in the role of managing director of U.S. structured finance. He holds a bachelor’s degree from the University of Arizona in business administration.

Steve brings to the Board deep knowledge of the credit ratings industry. With over 40 years in leadership roles within that industry, he has an excellent understanding of the needs of both investors and issuers of fixed income securities, including sovereign, corporate, asset backed and structured credits.

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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 Distinguished Service Professor of Entrepreneurship and Finance. He holds a bachelor’s degree in applied mathematics and economics from Harvard College and a Ph.D. in business economics from Harvard University. Steve formerly served on the board of trustees of the Columbia Acorn Funds and on the board of directors of Accretive Health, Inc. and Zayo Group Holdings, Inc.

Steve 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.

Gail Landis

Gail Landis was elected to the Board in May 2013. She was a founding partner of Evercore Asset Management, LLC, an institutional asset management firm, and served as managing principal from 2005 until her retirement in December 2011. From 2003 to 2005, she served as head of distribution for the Americas for Credit Suisse Asset Management, the asset management division of Credit Suisse AG. From 1981 to 2002, she served in senior roles with Sanford C. Bernstein & Co., Inc. and its successor company AllianceBernstein L.P., a global asset management firm. Gail currently serves on several nonprofit boards and investment committees, including the investment committee of the David Rockefeller Fund. She holds a bachelor’s degree in East Asian studies from Boston University and a master’s degree in business administration from New York University’s Stern School of Business.

Gail brings to the Board deep knowledge of the asset management industry. With over 30 years of experience as an investment management executive, she has an excellent understanding of the needs of institutional investors.

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, chief operating officer, and president. He currently serves as a member of the board of directors of NIC Inc. He holds a bachelor’s degree in history from Yale University and a juris doctor degree from Northwestern University School of Law.

As the former chief executive officer of a private investment management company, Bill 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 our customers’ priorities and challenges. Bill also currently serves on the board of another public company.

Doniel Sutton

Doniel Sutton has served as chief people officer of Fastly, Inc., a leading provider of global cloud platform services, since September 2020. From March 2017 to April 2019 she served as senior vice president, head of people at PayPal Holdings Inc., an online payments company and served in other capacities within the human resources group during her seven-year tenure at the company. From August 1997 to September 2011, she served in a variety of senior human resource leadership positions with Prudential Financial, Bank of America Corporation and Honeywell International. Doniel was appointed to the board of directors of Ross Stores, Inc., an apparel and home fashion retailer, in March 2021. She holds a bachelor’s degree in finance and a master’s degree in business administration in human resources management, both from the University of Illinois at Urbana-Champaign.

As a human resources executive, Doniel offers a wealth of experience in human capital management, global business expansions and executive development. Doniel’s experience at rapidly growing technology companies provide our Board with unique insights on strategies supporting scale and growth. Doniel also currently serves on the board of another public company.

Caroline Tsay

Caroline Tsay was elected to the Board in May 2017. She has served as chief executive officer of Compute Software, Inc., an enterprise cloud infrastructure software company, since January 2017. From March 2013 to December 2016, she served as vice

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president and general manager of software at Hewlett Packard Enterprise Company, an information technology company. From April 2007 to March 2013, she held several product leadership positions across the consumer search, e-commerce, and advertising businesses at Yahoo! Inc., a digital media company. Caroline currently serves on the board of directors of The Coca-Cola Company, and formerly served as a member of the board of directors of Rosetta Stone Inc. and Travelzoo Inc. She holds a bachelor’s degree in computer science and master’s degree in management science and engineering, both from Stanford University.

Caroline brings to the Board an extensive background in technology as well as significant leadership and management experience, including expertise in the areas of cloud infrastructure and sales. Caroline also currently serves on the board of another public company.

Board of Directors and Corporate Governance

We have adopted a set of Corporate Governance Guidelines to guide the Board in its objective of enhancing shareholder value over the long term. The shareholders elect the Board and vote on extraordinary matters. Our Board currently consists of ten directors. Jack Noonan is not standing for re-election at the annual meeting. If Doniel Sutton is elected to the Board, our Board will continue to consist of ten directors, of which seven directors, including Doniel, will be independent.

Independent Directors

The Board believes 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. Each of our director nominees, other than Joe Mansueto, Kunal Kapoor and Steve Joynt, qualifies as independent under Nasdaq requirements. Jack Noonan, who is not standing for re-election in accordance with our director retirement policy, is also an independent director. Joe Mansueto and Kunal Kapoor are members of our senior management team, and Steve Joynt is not considered independent under Nasdaq requirements because he was employed from July to October 2019 by DBRS during a time it was a subsidiary of the company.

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 (other than Steve Joynt) is independent, the Board determined that none of them had 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 director nominee’s business and personal activities as they relate to the company. For Robin Diamonte, the Board considered ordinary course transactions between the company and Raytheon Technologies Corp., where she is chief investment officer. For Cheryl Francis, the Board considered ordinary course transactions between the company and Aon plc, where she is a member of the board of directors, ordinary course transactions between the company and HNI Corporation, where she is a member of the board of directors, and ordinary course transactions between the company and Corporate Leadership Center, where she is co-chair. For Steve Kaplan, the Board considered a charitable contribution of $35 million to be paid over time by Joe Mansueto to support the creation of an institute to advance urban scholarship and education at The University of Chicago, where Steve is a professor. The Board also considered ordinary course transactions between the company and Zayo Group Holdings, Inc., where Steve Kaplan was a member of the board of directors until March 2020. For Doniel Sutton, the Board considered ordinary course transactions between the company and Fastly, Inc., where she is chief people officer. For Caroline Tsay, the Board considered ordinary course transactions between the company and Compute Software, Inc., where she is chief executive officer, and ordinary course transactions between the company and The Coca-Cola Company, where she is a member of the board of directors. Gail Landis, Bill Lyons, and Jack Noonan do not have any relationships involving the company other than their positions as members of the Board. The Board further reviewed and discussed information with regard to each director nominee’s

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immediate family members’ business activities as they relate to the Company. The Board found nothing in the relationships to be contrary to the standards for determining independence as contained in the Nasdaq’s requirements and the Company’s Corporate Governance Guidelines.

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 company’s 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 related to Cheryl’s 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.

The Board has determined that each member of the Compensation Committee qualifies as independent under special standards established by the SEC for members of compensation committees.

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 Board’s responsibilities include:

· selecting and regularly evaluating the performance of the chief executive officer;

· planning for chief executive officer succession;

· monitoring succession planning for other senior executives;

· overseeing the conduct of our business to evaluate whether the business is being properly managed, including review of the strategic plan;

· risk oversight; and

· 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 respective roles of the chairman of the board and chief executive officer. Joe Mansueto served as chairman of the board and chief executive officer of the company until January 1, 2017. At that time, Joe stepped back from our day-to-day operations to instead focus on strategy, capital allocation, advising our senior team, and leading the Board. Joe serves as chairman of the Board and executive chairman of the company. Kunal Kapoor has served as chief executive officer and a Board member since January 1, 2017. The Board believes that the current structure, which combines Joe’s unparalleled knowledge of all aspects of the business and its history as founder and largest shareholder with Kunal’s management of the day-to-day operations, benefits the business.

The Board has not designated a lead director; however, the independent directors choose from among themselves a lead director with respect to specific matters when appropriate. The Board believes this practice has been working well. 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.

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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 members of 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.

Board’s Role in Risk Oversight

The Board’s role in the company’s risk oversight process involves both the Audit Committee and the full Board. The Audit Committee reviews and discusses with management risks relating to the company’s 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 also reviews and discusses with management risks relating to the company’s cybersecurity and data privacy practices. At each of its regular meetings, the Audit Committee receives an update from Morningstar’s chief technology officer and chief information security officer in order to monitor trends and identify any emergent risks to our technology infrastructure. During 2020, the audit committee undertook an in depth review of our global technology operations to understand the ways the company mitigates risk through the strategic location of our global centers of excellence around the world.

Each year, the full Board receives a presentation by management on enterprise risks that are identified and prioritized by management, including operational, financial, legal and regulatory, strategic, and reputational risks. In recognition of the importance of human capital management, the Board also receives updates at each of its meetings on the organization health of the company. Given the challenges of the COVID-19 pandemic, employee health, productivity, and engagement were key areas of focus in 2020. The Board also reviews and discusses our diversity, equity, and inclusion goals. Management makes additional reports about enterprise risks as needed or as requested by the Board.

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 considered the following design elements of our compensation policies and practices:

· the mixture of cash and equity-based compensation encourages 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; and

· the use of stock ownership requirements for our executive officers not only aligns their interests with shareholders but also discourages a short-term focus.

Attendance at Board, Committee, and Annual Shareholders’ Meetings

The Board held seven meetings in 2020, two of which were special meetings relating to the acquisition of Sustainalytics. We expect each director to attend each meeting of the Board and the committees on which he or she serves as well as the annual meeting. As a result of the COVID-19 pandemic government restrictions and our concern for the health and safety of our Board members, all but one of the Board’s meetings in 2020 were held via video conference with optional in person attendance. In 2020, each director attended at least 75% of the meetings of the Board and the committees on which he or she served. Each of the directors standing for reelection attended our 2020 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

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approved by the Board. A copy of each charter is available in the Investor Relations area of our corporate website at https://shareholders.morningstar.com in the Governance section. The table below shows the members of each committee as of the date of this proxy statement, and the number of meetings held by each committee during 2020.

Director	Audit	Compensation	Nominating and Corporate Governance
Joe Mansueto
Kunal Kapoor
Robin Diamonte	Member		Member
Cheryl Francis	Chair	Member
Steve Joynt
Steve Kaplan		Chair	Member
Gail Landis	Member		Member
Bill Lyons		Member	Chair
Jack Noonan(1)	Member	Member
Caroline Tsay	Member		Member
2020 Meetings	9	5	6

(1) In accordance with the Board’s retirement policy, Jack will not be standing for re-election as a member of the Board and such Board committees as of the annual meeting.

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 44.

Compensation Committee

The Compensation Committee reviews and determines the base salary, incentive plan awards, and other matters relating to compensation for the chief executive officer based on his individual performance and overall contribution to the company. For our other executive officers other than Joe Mansueto, the Compensation Committee reviews and determines base salaries, incentive plan awards, and other matters relating to compensation based on feedback from our chief executive officer about the officer’s performance and overall contribution to the company. At Joe’s request, he did not participate in our equity or cash-based incentive programs in 2020 and his annual salary has been fixed at $100,000 since resuming his role as our chief executive officer in 2000 and continuing in his role as executive chairman. The Compensation Committee oversees the administration of our equity-based compensation plans, including reviewing and granting equity-based awards to our non-employee directors, executive officers, and other employees. The Compensation Committee also reviews and recommends to the Board various other Morningstar compensation policies, programs, 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 certain of its authority to a subcommittee of the Compensation Committee. The Compensation Committee may engage its own outside advisors as it deems appropriate. In 2020, management retained an independent compensation consultant, Willis Towers Watson, to review the company’s executive compensation program. We discuss additional information about the Compensation Committee, its activity during 2020, and related matters in the Compensation Discussion and Analysis section, which begins on page 15.

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 technology, human resources, marketing, sales, finance, and other disciplines relevant to the success of a publicly traded company; understanding of various aspects of our business; education and professional background, including

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current employment and other board memberships; and reputation for integrity. Although the company does not have a formal diversity policy, 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 2020, we did not use a search firm or pay fees to other third parties in connection with seeking or evaluating Board nominee candidates. Doniel Sutton, who is being nominated by the Board to serve as a director for the term beginning at the annual meeting, was introduced to our chief executive officer and the Chair of the Nominating and Corporate Governance Committee by a third party. The Board sought to add a member with significant human capital management expertise and experience at high growth technology companies, and as described on page 6, Doniel’s experience fit this need. The Nominating and Corporate Governance Committee will consider candidates proposed by shareholders using the same criteria it uses for other candidates. A shareholder seeking to recommend a prospective nominee for the Nominating and Corporate Governance Committee’s consideration should submit the candidate’s name and qualifications to our corporate secretary at Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602. In addition, our by-laws permit a shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of our common stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the Board or two director nominees, provided that the shareholder(s) and nominee(s) satisfy the requirements set forth in our by-laws, which can be found in the Investors Relations area of our corporate website at https://shareholders.morningstar.com in the Governance section.

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 other corporate governance matters.

Limitation on Other Board Service

We require that our directors who serve as an executive officer of a public company serve on a total of no more than three public company boards, including ours. We require that our directors who do not serve as an executive officer of a public company serve on no more than four public company boards, including ours.

Communications from Shareholders to the Board

Shareholders may communicate with the Board by writing to our corporate secretary at Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602 or by sending an email to board@morningstar.com. The name of any specific intended Board recipient should be noted in the communication. The Board has instructed our 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 Board’s 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 concerning corporate governance matters. We have posted the guidelines in the Investor Relations area of our corporate website at https://shareholders.morningstar.com in the Governance section.

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Among other matters, the Corporate Governance Guidelines include the following items concerning the Board:

· The Board believes that a board of directors consisting of seven to 12 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 to fill vacancies serve until the next annual meeting at which directors are to be elected.

· 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 law and regulations.

· The Board does not believe it should establish term limits. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they can also result in the loss of contribution of directors who have been able to develop, over a period of time, increasing insight into the company and its operations and, therefore, provide an increasing contribution to the Board as a whole. As an alternative to term limits, the Board believes it can continue to evolve and adopt new viewpoints through the process for the evaluation and nomination of director candidates. In that regard, the Nominating and Corporate Governance Committee and the Board consider each member’s length of service and openness to new ideas when considering the appropriate slate of candidates to recommend for nomination.

· Directors are required to retire from the Board when they reach the age of 73. A director reaching the age of 73 following his or her election to the Board may continue to serve until the next annual meeting. On the recommendation of the Nominating and Corporate Governance Committee, the Board may waive this requirement for any director if deemed in the best interests of the company.

· The Board believes that any director who discontinues his or her present employment or who materially changes his or her position should promptly tender a written offer of 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 Board’s membership criteria in light of his or her changed circumstances.

· All directors are required to comply with their obligations described in the Conflicts of Interest section of our Corporate Governance Guidelines. 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 director’s 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 required to resign.

· If a director has a personal interest in a matter before the Board, the director must disclose the interest to the Board, must excuse himself or herself from participation in the discussion, and may not vote on the matter.

We have posted our Code of Ethics, which has been adopted by the Board and is applicable to each director, in the Investor Relations area of our corporate website at https://shareholders.morningstar.com in the Governance section.

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.

Cash Compensation

In 2020, each non-employee director received an annual retainer of $40,000. Non-employee directors who are members of the Audit Committee, Compensation Committee, or Nominating and Corporate Governance Committee received an additional annual

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retainer of $5,000, except for Gail Landis who received an additional annual retainer of $5,000 for acting as a representative of the Nominating and Corporate Governance Committee at meetings of the boards of directors of our credit ratings entities DBRS, Inc., DBRS GmbH, DBRS Ratings Limited, and DBRS Limited. The Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair received an annual retainer of $25,000, $15,000, and $15,000, respectively. In addition to the retainers described above, we reimburse our non-employee directors for travel expenses for attending Board and committee meetings, when applicable.

Equity-Based Compensation

In 2020, each of our non-employee directors received an annual grant of restricted stock units covering shares with a value of approximately $150,000 at grant that vest over a period of three years. In lieu of receiving the annual grant of restricted stock units, new non-employee directors receive an initial grant of restricted stock units covering shares with a value of approximately $250,000 at grant, also vesting over a period of three years.

2020 Directors’ Compensation

The following table shows compensation earned by each of our non-employee directors in 2020. Joe Mansueto and Kunal Kapoor 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		Stock Awards		Total(1)
Robin Diamonte	$	50,000	$	149,991	$	199,991
Cheryl Francis	75,000		149,991		224,991
Steve Joynt	50,000		249,985		299,985
Steve Kaplan	65,000		149,991		214,991
Gail Landis	55,000		149,991		204,991
Bill Lyons	65,000		149,991		214,991
Jack Noonan	50,000		149,991		199,991
Caroline Tsay	50,000		149,991		199,991

(1) As required by relevant SEC rules, the amounts represent the aggregate grant date fair value for restricted stock unit awards granted in 2020 as determined pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (FASB ASC Topic 718). See Note 13 of the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the relevant assumptions used in calculating these amounts. As of December 31, 2020, our non-employee directors held the following number of unvested restricted stock units: Robin Diamonte 2,230; Cheryl Francis 2,230; Steve Joynt 1,720, Steve Kaplan 2,230; Gail Landis 2,230; Bill Lyons 2,230; Jack Noonan 2,230; Caroline Tsay 2,230. Stock awards when granted are rounded down to the nearest whole share.

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Security Ownership of Certain Beneficial Owners and Management

The following table shows information about beneficial ownership of our common stock as of March 1, 2021 by each of our directors and nominees, 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 percentages in the following tables are based on 42,945,963 shares of our common stock outstanding as of March 1, 2021.

Shareholder	Number of Shares Beneficially Owned	Percentage of Common Stock
Joe Mansueto(1)	19,357,695	45.1	%
Kunal Kapoor	56,009	*
Jason Dubinsky	10,037	*
Bevin Desmond(2)	46,163	*
Danny Dunn	4,961	*
Robin Diamonte	6,047	*
Cheryl Francis	30,142	*
Steve Joynt	0	*
Steve Kaplan	43,288	*
Gail Landis	1,733	*
Bill Lyons(3)	22,312	*
Jack Noonan(4)	33,332	*
Doniel Sutton	0	*
Caroline Tsay(5)	3,663	*
All directors and executive officers as of March 1, 2021 as a group (13 persons)	19,615,382	45.7
5% Shareholders
Select Equity Group, L.P.(6)	2,235,950	5.2

* Represents beneficial ownership of less than 1%.

(1) Joe Mansueto’s address is c/o Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602. Reflects 18,975,731 shares of our common stock over which Joe has sole voting and investment power and 381,964 shares of our common stock over which Joe has shared voting and investment power. Joe has pledged 3,000,000 shares of our common stock as security under the terms of a bank credit agreement. Includes 175,714 shares of our common stock held by the Mansueto Foundation, a private charitable foundation.

(2) Includes 21,107 shares of common stock held by Bevin’s spouse.

(3) Includes 7,500 shares of common stock as to which Bill has shared voting and investment power.

(4) Includes 1,000 shares of common stock held by Jack’s spouse.

(5) Reflects ownership rounded to the nearest whole share. Caroline owns an additional 0.0232 fractional shares.

(6) The indicated interest is based solely on a Schedule 13G filed on February 12, 2021 by Select Equity Group, L.P. and George S. Loening (together, Select Equity) whose business address is 380 Lafayette Street, 6th Floor New York, New York 10003. In its Schedule 13G, the reporting persons reported ownership as of December 31, 2020 as follows:

		Beneficial Ownership		Sole Voting Power		Shared Voting Power		Sole Investment Power		Shared Investment Power
Select Equity		2,235,950		0		2,235,950		0		2,235,950

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Compensation Discussion and Analysis

In this section, we discuss the goals of our compensation program and how we compensated each of the executive officers for 2020 who are identified in the following table. We refer to this group as the named executive officers, and the group includes our chief executive officer, our chief financial officer, and our three other most highly compensated executive officers in office as of the last day of 2020.

Name		Title
Kunal Kapoor		Chief Executive Officer
Jason Dubinsky		Chief Financial Officer
Bevin Desmond		Head of Talent & Culture
Danny Dunn		Chief Revenue Officer
Joe Mansueto		Executive Chairman and Chairman of the Board

Goals of Our Compensation Program

Our Compensation Committee’s compensation philosophy is to pay our executives competitive base salaries and provide them with the opportunity to earn meaningful annual cash incentive compensation through the Morningstar Incentive Plan (the Corporate Incentive Plan) and equity-based compensation through the Morningstar 2011 Stock Incentive Plan (the 2011 Plan).

Our goal is to develop compensation policies and practices that:

· attract and retain talented executives;

· motivate and reward our executives for their individual and collective contributions to the company; and

· align our executives’ 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 overall contribution to the company and the goals and initiatives most relevant to his or her role or the particular product area that such member manages.

The Compensation Committee does not use rigid formulas to determine executive compensation but nevertheless aims to tie annual cash incentive compensation closely to value creation, as measured by increases in revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) or similar measures. Our equity program, combined with our stock ownership requirements for our executive officers and directors, is designed to reward long-term stock performance. The Compensation Committee bases its decisions about an executive’s compensation on its assessment of his or her performance and contribution toward enhancing the intrinsic value of our company and its product areas. The Compensation Committee relies on its judgment in determining the amounts and combination of base salary, annual bonus, and equity awards. In 2020, management retained an independent compensation consultant, Willis Towers Watson, to review aspects of the Company’s executive compensation program, for a fee of approximately $61,176. Separately, Willis Towers Watson also provided, at management’s request, services relating to broader human resources-related engagements, the fees for which totaled approximately $37,308 in 2020.

The Compensation Committee compares 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 doesn’t target specific compensation levels based on this review but considers this information to obtain a general understanding of current compensation practices.

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When evaluating 2020 compensation, the Compensation Committee compared the total compensation of our executives with compensation for executives at the following companies:

AssetMark Financial Holdings, Inc.		Moody’s Corporation
CBOE Holdings, Inc.		MSCI Inc.
Envestnet, Inc.		SEI Investments Company
FactSet Research Systems, Inc.		SS&C Technologies Holdings, Inc.
Fair Isaac Corporation		Verisk Analytics, Inc.
MarketAxess Holdings, Inc.

The above peer group was the same peer group that was used to evaluate 2019 compensation decisions except for the removal of Financial Engines, Inc. due to its being acquired by Hellman & Friedman and the additions of AssetMark Financial Holdings, Inc, MarketAxess Holdings, Inc., Moody’s Corporation, and Verisk Analytics, Inc. These companies were added with consideration of the following factors: each company’s size relative to Morningstar, relevant lines of business in relation to Morningstar, and in most cases, the commonality of being identified as a peer of other existing Morningstar peers.

The Compensation Committee also evaluated published compensation survey data provided by Radford. The survey provides information about compensation levels and practices at financial services and technology companies. When reviewing data from published surveys, the Compensation Committee focuses on information specific to companies of Morningstar’s size. For purposes of this Compensation Discussion and Analysis, we refer to the compensation data for these companies and surveys as “market data.”

“Say on Pay” Vote

Beginning in 2020, the company now provides its shareholders with an opportunity to cast an advisory “say on pay” vote on executive compensation every year until the next vote on the frequency of future say on pay votes. The company held its last say on pay vote at its 2020 Annual Shareholders’ Meeting, and the proposal was approved with approximately 99% of the votes cast in support of the proposal. Given the significant shareholder support, the Compensation Committee did not make any changes to the company’s executive compensation program in response to the 2020 say on pay vote. The company is conducting a say on pay vote at its 2021 Annual Shareholders’ Meeting. For additional information on this year’s say on pay vote, see Proposal 3: Advisory Vote to Approve Executive Compensation.

Executive Chairman Compensation

Joe Mansueto has served as chairman since our company’s inception and as chief executive officer from 1984 to 1996 and from 2000 to 2016. In consideration of his status as our principal shareholder, Joe believes that his compensation should be directly aligned with other shareholders and be realized primarily through appreciation in the long-term value of our common stock. Accordingly, at his request, he did not participate in our equity or cash-based incentive programs in 2020. In addition, Joe’s annual salary has been fixed at $100,000 since resuming his role as our chief executive officer in 2000 and continuing in his role as executive chairman.

2020 CEO Compensation

During 2019, the Compensation Committee continued to monitor, evaluate, and revisit Kunal’s target total compensation. In 2019, Willis Towers Watson conducted a competitive compensation analysis for the chief executive officer role using the company’s 2019 compensation peer group. Based on the Compensation Committee’s review of the analysis prepared by Willis Towers Watson and other factors, the Compensation Committee originally established Kunal’s 2020 target total compensation at the levels it felt appropriate as a more experienced CEO, with an emphasis on recognizing the successes he has delivered as CEO since his promotion and the opportunities to deliver future value to the firm through his strategic direction and leadership. The Compensation Committee set Kunal’s 2020 target total compensation by replicating the target total compensation package that was established in 2017 and originally intended to include a modest increase to his base salary and larger increases to his variable targets (i.e., bonus and equity) from which value will only be realized with continued demonstrated performance. The Compensation Committee originally approved Kunal’s 2020 base salary to be $500,000 and his 2020 target bonus to be

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$1,000,000, but those increases were subsequently delayed consistent with our decision to delay other compensation increases across the company as a result of the uncertainty created by the COVID-19 pandemic. Therefore, the increases to Kunal’s base salary and target bonus were not implemented in 2020.

The Compensation Committee will continue to monitor and manage the progression of Kunal’s target total compensation over time based on his performance. The table below shows Kunal’s 2020 target total compensation:

Elements of our Executive Compensation Program

Our executive compensation program currently consists of two main elements: cash compensation (annual base salary and annual bonus) and equity-based compensation (restricted stock units and market stock units). The Compensation Committee believes that its current compensation program for executive officers strikes the correct balance between short-term and long-term incentives. This mix of equity and cash compensation is intended to align the interests of our executive officers with those of our shareholders and provide incentives for our executive officers to enhance the intrinsic value of our company.

Cash Compensation

We pay cash compensation in the form of base salary and bonuses under the Corporate Incentive Plan. We include bonuses in the compensation package because the Compensation Committee believes doing so encourages strong financial and operational performance. We describe each component of cash compensation in more detail below.

Base Salary: The Compensation Committee reviews and determines the base salary for Kunal based on his individual performance and overall contribution to the company. For our other executive officers, the Compensation Committee reviews and determines their base salaries based in part on Kunal’s feedback about the individual’s performance and overall contribution to the company.

For 2020, no salary changes were approved for our named executive officers. As described above, the Compensation Committee originally approved Kunal’s 2020 base salary to be $500,000, but his increase was subsequently delayed to align with other delayed compensation across the company and so Kunal’s base salary increase was not implemented in 2020.

Annual Incentives: The Corporate Incentive Plan rewards participants for meeting and exceeding annual performance goals approved by the Compensation Committee. As noted above, Joe does not participate in the Corporate Incentive Plan. The design of the Corporate Incentive Plan gives the Compensation Committee discretion to establish a bonus for Kunal based on his individual performance and overall contribution to the company and bonuses for our other executive officers (other than Joe) based on an assessment of the individual’s achievements and feedback from Kunal about the individual’s performance and overall contribution to the company and, in certain cases, the performance of particular product areas.

2020 Bonus Target and Bonus Determinations for Named Executive Officers (Other than Joe Mansueto): In December 2019, the Compensation Committee approved the 2020 bonus targets for each of our named executive officers (other than Joe Mansueto, who does not participate in the Corporate Incentive Plan). The 2020 bonus targets for the named executive officers did not increase as compared to 2019. As described above, the Compensation Committee originally approved Kunal’s 2020 target bonus to be $1,000,000, but his increase was subsequently delayed to align with other delayed compensation across the company and

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Kunal’s target bonus increase was not implemented in 2020. Kunal’s 2020 bonus target was set at $950,000, which is 237.5% of his base salary, and the 2020 bonus targets for the other named executive officers ranged from approximately 100% to 125% of each named executive officer’s base salary. The Compensation Committee determined these target bonus levels based on its assessment of the named executive officer’s impact on the company’s and a desire for a meaningful portion of total compensation to be in the form of variable incentive pay. In determining target bonus levels, the Compensation Committee also reviewed incentive compensation practices at similar companies. As noted above, while the Compensation Committee does not target compensation elements against the market data, the Compensation Committee does review the market data to understand competitive market practices with respect to executive compensation.

The Compensation Committee established adjusted revenue and adjusted EBITDA as the two metrics to measure company and product area performance for the annual cash incentive bonuses in 2020. The Compensation Committee determined payouts for 2020 primarily on financial performance, using a formula that measured adjusted revenue and adjusted EBITDA relative to company and product area goals established for the bonus program, rather than year-over-year comparisons. Revenue and EBITDA are adjusted to exclude the impact of certain items, such as expected incentive compensation costs, foreign currency fluctuations, capitalized software development costs, acquisitions and divestitures and associated costs, and certain investments in the business. At the beginning of 2020, the Compensation Committee established a funding formula that specifies bonus funding for adjusted revenue and adjusted EBITDA based on various performance levels, with the final funding factor being weighted 50% for adjusted revenue and 50% for adjusted EBITDA, which was shifted from 67% for adjusted revenue and 33% for adjusted EBITDA to put more emphasis on profitability. The reason for this shift was that cost management, contribution, and client retention were more important areas of focus in 2020 than in prior years as a result of the uncertain market environment during 2020 due to the COVID-19 pandemic. While the change in weightings to adjusted revenue and adjusted EBITDA were one of the important actions we took to navigate 2020, the Compensation Committee expects to return to an emphasis on top line growth with a heavier weighting on adjusted revenue in 2021. The graphics below illustrate how this formula works for company and product area performance:

2020 Adjusted Revenue Funding Formula

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2020 Adjusted EBITDA Funding Formula

The Compensation Committee determined that Kunal’s, Jason’s, Bevin’s, and Danny’s bonus funding should be based entirely on the company performance measures.

Company Performance Measures: In 2020, our overall company financial performance resulted in the following calculation of the bonus funding factor and final payout factor:

Measure	Achievement		Goal		Goal Attainment		Unweighted Funding Factor		Weighting		Funding Factor
Adjusted Revenue (Millions)	$	1,348.7	$	1,401.2	96.3	%	88.0	%	50	%	97.8	%
Adjusted EBITDA (Millions)	$	445.5	$	441.0	103.1	%	107.6	%	50	%	97.8	%

Each executive’s bonus target was multiplied by the final funding factor to determine the funding adjusted target bonus. Adjustments to the calculated award amounts were then determined based on each executive’s individual performance.

The table below shows the bonus earned by each of the named executive officers based on the achievement of company financial goals and the adjustments made for individual performance. Consistent with last year, the Compensation Committee approved an individual performance factor for Kunal which was used to calculate his final bonus amount. This final bonus amount was then allocated so that 100% of Kunal’s funding adjusted target was paid in cash and the remainder in restricted stock units that vest in full on the first anniversary of the grant date. For each of our other named executive officers, Kunal recommended, and the Compensation Committee approved, an individual performance factor which was used to calculate each of their respective cash bonus awards. Also, Kunal recommended and the Compensation Committee approved, an additional grant for Jason, Bevin and Danny of restricted stock units that vest in four equal annual installments commencing on the first anniversary of the grant date as part of the company’s program to deliver outsized awards to top performers. We describe the factors affecting the individual performance adjustment for each of our named executive officers in more detail below.

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	Corporate Incentive Plan
	2020 Target Bonus		Financial Funding Factor		Individual Performance Adjustment		2020 Cash Bonus		Restricted Stock Units (1 year vest)		Restricted Stock Units (4 year vest)		2020 Final Bonus
Kunal Kapoor	$	950,000	97.8	%	125	%(1)	$	929,100	$	232,275	$	—	$	1,161,375
Jason Dubinsky	500,000		97.8	%	110	%(2)	537,900		—		61,125		599,025
Bevin Desmond	270,000		97.8	%	135	%(2)	356,481		—		66,015		422,496
Danny Dunn	300,000		97.8	%	110	%(2)	322,740		—		36,675		359,415

(1) For Kunal, the individual performance adjustment is applied to calculate his final bonus amount. As has been our practice since Kunal became CEO, his bonus was allocated so that 100% of Kunal’s funding adjusted target was paid in cash and the remainder in restricted stock units to be granted on May 15, 2021, which will vest in full on the first anniversary of the grant date.

(2) For Jason, Bevin and Danny, the individual performance adjustment is applied to calculate each of their respective cash bonus amounts. Additionally, in 2020 Morningstar rewarded its top performers (those whose individual performance adjustment was above 100%) with special one-time impact awards of restricted stock units that vest in four equal annual installments commencing on the first anniversary of the grant date. Jason, Bevin, and Danny will receive these restricted stock units on May 15, 2021 in addition to their cash bonus as a result of being in this cohort and consistent with others across the company whose individual performance adjustment was above 100%.

2020 Bonus Payouts: The Compensation Committee reviewed Kunal’s performance and his broader impact on the growth of the business and the Compensation Committee reviewed Kunal’s evaluation of each executive’s contributions to key company initiatives and his or her broader impact on the growth of the business. The bonus discussion below describes the key goals for each named executive officer, how the Compensation Committee evaluated performance against those goals, and the factors affecting the individual performance adjustment for each of our named executive officers.

Kunal Kapoor: In 2020, Kunal’s key goals included driving our financial performance and making Morningstar the leading voice for ESG investors. Kunal was also charged with delivering an exceptional employee experience, as measured through employee engagement and efforts around career development and diversity, equity and inclusion.

While the company’s financial performance showed resilience, the economic impact of the COVID-19 pandemic and market turmoil presented many challenges. Nonetheless, Kunal oversaw the company’s continued expansion of the data we collect, the insights we deliver, and the range of research that we provide on investor portfolios. And as the convergence of public and private markets continues, PitchBook is fast becoming the go-to tool for investors in this growing space. Finally, Kunal led the acquisition of Sustainalytics, significantly enhancing our ESG offering and positioning us for growth and success in this space. Based on these factors, the Compensation Committee determined that Kunal’s individual performance adjustment be 125%, which resulted in a final bonus of $1,161,375. Kunal received $929,100 in cash and the remaining $232,275 in restricted stock units to be granted on May 15, 2021. The restricted stock units vest in full on the first anniversary of the grant date.

Jason Dubinsky: Among his key achievements in 2020, Jason’s successful stewardship of our first-ever debt offering was notable. We believe that we were able to raise long-term funds at a favorable rate, providing Morningstar with additional financial flexibility. Jason contributed meaningfully in other ways, too, including helping to drive a focus on expense management when the pandemic first hit and uncertainty reigned, as well ensuring that our financial systems and resources continue to scale appropriately for the size of organization we are becoming. Morningstar’s financial success in 2020 was in no small part due to Jason’s efforts, and for this reason, Kunal recommended a 110% individual performance adjustment for Jason. This resulted in Jason receiving a cash bonus of $537,900. Jason will also receive $61,125 in restricted stock units to be granted on May 15, 2021, which will vest in four equal annual installments commencing on the first anniversary of the grant date.

Bevin Desmond: Bevin was instrumental in Morningstar’s response to the pandemic and led from the front, beginning in January 2020 when the pandemic had the potential to meaningfully disrupt our sizable operations in China. As it spread, Bevin stepped up to ensure that our colleagues and their families were healthy, cared for, and appropriately supported during a most unusual period. She also contributed to onboarding the new Sustainalytics team and completing the integration of DBRS colleagues fully into Morningstar. Bevin’s efforts helped contribute to the highest engagement scores experienced in

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Morningstar’s history and a strong commitment to our culture, resulting in Kunal recommending a 135% individual performance adjustment for Bevin. This resulted in Bevin receiving a cash bonus of $356,481. Bevin will also receive $66,015 in restricted stock units to be granted on May 15, 2021, which will vest in four equal annual installments commencing on the first anniversary of the grant date.

Danny Dunn: Our sales teams had a successful selling year despite all the unique challenges it presented, with most teams meeting or surpassing their sales targets for the year, thanks especially to a strong close to 2020. Danny led from the front in this context, and kept business development teams focused on clients and growth opportunities, despite the unique circumstances. Furthermore, he took on additional responsibility in the areas around demand generation and customer success and service. Our sales operations team also continued to integrate and onboard new teams to Morningstar in an efficient manner, and the technology stack that supports our sales and service efforts continues to get stronger and more scalable under Danny’s direction. For these reasons, Kunal recommended a 110% individual performance adjustment for Danny. This resulted in Danny receiving a cash bonus of $322,740. Danny will also receive $36,675 in restricted stock units to be granted on May 15, 2021, which will vest in four equal annual installments commencing on the first anniversary of the grant date.

Equity-Based Compensation

Our stock incentive plan, the 2011 Plan, provides for grants of options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and market stock units. All of our employees are eligible for awards under the 2011 Plan. As noted above, Joe Mansueto does not participate in the 2011 Plan.

Equity awards that vest over time are an important part 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 to help align the economic interests of our executive officers with those of our shareholders. We also believe it’s important for our executives to have a long-term stake in the success of the business. The amount of equity-based compensation we provide to each executive officer in a given year generally reflects the individual’s level of responsibilities within the company.

The Compensation Committee reviews the value of annual equity awards for each executive officer to evaluate whether they reflect each individual’s responsibilities within the company and encourage retention and long-term alignment with the company’s success. In 2020, we granted restricted stock units and market stock units to our named executive officers. Each named executive officer’s target equity value is allocated equally between restricted stock units and market stock units. Restricted stock units were granted to our named executive officers in May. With respect to market stock units, the Compensation Committee elected to grant one-half of each named executive officer’s targeted value in May and the other half in November to minimize the effect of any stock price volatility on the awards. We describe these awards in more detail below.

Restricted Stock Units: In 2020, the Compensation Committee granted restricted stock units to our named executive officers other than Joe Mansueto that vest in four equal annual installments commencing on the first anniversary of the grant date. The table below shows the approximate value approved for each named executive officer in 2020 and 2019.

	Approximate Value of 2020 Restricted Stock Units			Approximate Value of 2019 Restricted Stock Units
Kunal Kapoor	$	3,750,000	(1)	$	600,000	(2)
Jason Dubinsky	400,000			350,000
Bevin Desmond	250,000			200,000
Danny Dunn	225,000			175,000		(3)

(1) During 2020, Kunal received a restricted stock unit grant in the amount of $503,975 as part of his 2019 bonus award. This award is not included in Kunal’s 2020 target value in the table above.

(2) During 2019, Kunal received a restricted stock unit grant in the amount of $230,690 as part of his 2018 bonus award. This award is not included in Kunal’s 2019 target value in the table above.

(3) During 2019, Danny received a restricted stock unit grant in the amount of $76,233 as part of his 2018 bonus award. This award is not included in Danny’s 2019 target value in the table above.

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The value of Kunal’s restricted stock unit award in 2020 was higher than in 2019 as noted under 2020 CEO Compensation. The value of Jason’s, Bevin’s, and Danny’s restricted stock unit award increased to reflect their performance and contributions; their overall equity increases were the only compensation increases they received in 2020.

Market Stock Units: In 2020, the Compensation Committee granted market stock units to our named executive officers, other than Joe Mansueto, that vest three years from the grant date depending on our total shareholder return (TSR) over that three-year period. In addition to the TSR metric, the market stock units granted to the named executive officers, other than Joe Mansueto, in 2020 had a performance kicker, where an additional amount of market stock units would be earned for outperformance during the performance period. The Compensation Committee granted one-half of the 2020 targeted value on May 15, 2020 and the other half on November 15, 2020. The table below shows the targeted value for each named executive officer in 2020 and 2019.

	2020 Market Stock Unit Kicker	Approximate Target Value of 2020 Market Stock Units			2019 MarketStock Unit Kicker	Approximate Target Value of 2019 Market Stock Units
Kunal Kapoor	Performance Kicker	$	750,000	(1)	Revenue Kicker	$	600,000	(2)
Jason Dubinsky	Performance Kicker	400,000			Revenue Kicker	350,000
Bevin Desmond	Performance Kicker	250,000			Revenue Kicker	200,000
Danny Dunn	Performance Kicker	225,000			Revenue Kicker	175,000

(1) As noted under 2020 CEO Compensation, during 2020, Kunal received the first of three grants of market stock units with a target value of $1,000,000, with a three-year performance period. This award was approved in 2019 when the Compensation Committee evaluated and revisited Kunal’s target total compensation as a more experienced CEO with demonstrated successes, strategic direction, and leadership, and is not included in Kunal’s 2020 target value in the table above.

(2) During 2019, Kunal received a third grant of market stock units with a target value of $834,000, with a three-year performance period. This award was approved at the time Kunal was appointed as chief executive officer in January 2017 and is not included in Kunal’s 2019 target value in the table above.

The value of Kunal’s market stock unit award in 2020 was higher than in 2019 as noted under 2020 CEO Compensation. The value of Jason’s, Bevin’s, and Danny’s market stock unit award increased to reflect their performance and contributions; their overall equity increases were the only compensation increases they received in 2020.

The market stock units vest based on our TSR over the three-year performance period, as shown in the table below. In 2020, the Target TSR to earn 100% of the target market stock units was raised from 10% to 20%, along with corresponding adjustments to the Threshold TSR and Maximum TSR. The shares earned based on TSR performance between the performance levels described below will be based on a linear interpolation.

Performance Level		Shares Earned as a Percentage of Target Market Stock Units
Threshold TSR		0% vesting if TSR is a negative 13.33%
Target TSR		100% vesting if TSR is 20%
Maximum TSR		150% vesting if TSR is 45%

In addition to TSR performance, if there is outperformance during the performance period, the named executive officers, other than Joe Mansueto, may receive an additional number of shares. The performance kicker will be determined by the Compensation Committee at or before the end of the performance period and will take into consideration actual performance results (other than TSR) and other metrics, quantitative and/or qualitative during the performance period. The shift from a revenue kicker in 2019 to a performance kicker in 2020 was made due to the uncertain market environment and uncertain three-year outlook during 2020 due to the COVID-19 pandemic.

Performance Level		Performance Kicker
To Be Determined by the Compensation Committee		100%-200% of shares earned based on TSR performance

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2017 Market Stock Units: On May 15, 2017 and November 15, 2017, the Compensation Committee granted market stock units to each of our named executive officers, other than Joe Mansueto. Under the terms of the May 2017 and November 2017 market stock unit awards, we measured Morningstar’s total shareholder return over a three-year performance period beginning on each of May 15, 2017 and November 15, 2017, respectively compared to the payout scale for each grant. The tables below disclose the payout scale, actual total shareholder return, and resulting MSUs earned as a percentage of target by each of named executive officers, other than Joe Mansueto.

May 2017 Market Stock Units

Performance Level		Shares Earned as a Percentage of Target Market Stock Units
Threshold TSR		0% vesting if TSR is a negative 23.33%
Target TSR		100% vesting if TSR is 10%
Maximum TSR		150% vesting if TSR is 35%
Actual TSR and Actual MSUs vesting		94.2% actual TSR resulting in 150% of target MSUs vesting

November 2017 Market Stock Units

Performance Level		Shares Earned as a Percentage of Target Market Stock Units
Threshold TSR		0% vesting if TSR is a negative 23.33%
Target TSR		100% vesting if TSR is 10%
Maximum TSR

Annual
Base Salary

Target
Bonus

Equity Awards

Annual equity grant with a target value of $1,500,000, allocated equally between market stock units and restricted stock units. Ongoing, annual equity grants for Kunal in future years could be more or less than $1,500,000 if warranted by performance and competitiveness.

A restricted stock unit grant of $3,000,000, which was granted on May 15, 2020 and will vest over a period of five years, which was approved by the Compensation Committee in December 2019.

The first grant of three performance-based market stock unit awards with a target value of $1,000,000 and with a three-year performance period, which was approved by the Compensation Committee in December 2019.

SEC Form DEF 14A filed by Morningstar, Inc.