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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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Notice of 2018 Annual Meeting
and
Proxy Statement

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April 6, 2018

Dear Shareholder:

We will hold our 2018 Annual Shareholders’ Meeting at 9 a.m. Central time on Friday, May 18, 2018 at our corporate headquarters at 22 West Washington Street, Chicago, Illinois 60602. We look forward to your participation, either in person or by proxy.

At this year’s meeting, the agenda includes the following items:

·                  Election of directors.

·                  Ratification of the appointment of our independent registered public accounting firm.

Please refer to the proxy statement for detailed information on each of the proposals and the meeting.

Each share of our stock that you own represents one vote. If you do not vote your shares, you will not have a say on the important issues to be voted on at the meeting.

If you have any questions concerning the meeting or the proposals, please contact our Investor Relations department at (312) 696-6164. For questions regarding your stock ownership, you may contact our transfer agent, Computershare Investor Services, LLC, through its website at www.computershare.com/contactUS or by phone at (866) 303-0659 (within the United States and Canada) or (312) 588-4659 (outside the United States and Canada).

Sincerely,

Joe Mansueto
Chairman of the Board

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Morningstar, Inc.

Notice of Annual Shareholders’ Meeting
To be held on May 18, 2018

Dear Shareholder:

You are cordially invited to attend our 2018 Annual Shareholders’ Meeting, which will be held at 9 a.m. Central time on Friday, May 18, 2018 at our corporate headquarters at 22 West Washington Street, Chicago, Illinois 60602.

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 or until their respective successors have been elected and qualified.

·                  To ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2018.

·                  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. We have not received notice of other matters to be presented at the meeting.

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 19, 2018, 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 in person. For further details, see How do I vote? on page two.

Heidi Miller
Associate General Counsel and Corporate Secretary
Chicago, Illinois
April 6, 2018

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Proxy Statement

Our Board of Directors (the Board) solicits your proxy for the 2018 Annual Shareholders’ Meeting to be held at 9 a.m. Central time on Friday, May 18, 2018 at our corporate headquarters at 22 West Washington Street, Chicago, Illinois 60602 and at any postponement or adjournment of the meeting, for the purposes set forth in the Notice of Annual Shareholders’ Meeting included with this proxy statement. We made copies of this proxy statement available to shareholders beginning on April 6, 2018.

Questions and Answers About the Annual Meeting and the Proxy Materials

Where is the annual meeting?

We will hold the annual meeting at 9 a.m. Central time on Friday, May 18, 2018 at our corporate headquarters at 22 West Washington Street, Chicago, Illinois 60602. When you arrive in the lobby, check in at the security desk and take the elevator directly to the seventh floor to reach our auditorium. You will need to present a photo ID when you check in at the security desk. We will have signs posted that direct you to the appropriate location. We will not permit cameras or other recording devices in the auditorium.

Why did I receive a notice in the mail regarding Internet availability of proxy materials instead of a full set of proxy materials?

We provide access to our proxy materials over the Internet. On April 6, 2018 we mailed a Notice of Internet Availability of Proxy Materials to our shareholders of record and beneficial owners. The Notice explains how to access the proxy materials on the Internet and how to vote your proxy. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, please follow the instructions for requesting printed materials included in the Notice.

What will shareholders vote on at the annual meeting?

Shareholders will elect directors to serve until our next annual meeting and will also be asked to ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2018. We do not expect any other matters to be presented at the meeting. If other matters are properly presented for voting, the persons named as proxies will vote in accordance with their best judgment on those matters.

Who is entitled to vote at the annual meeting?

Shareholders of record as of the close of business on March 19, 2018 are entitled to vote at the meeting. On that date, there were 42,545,006 outstanding shares of common stock.

What is a shareholder of record?

If your shares are registered directly in your name with our transfer agent, Computershare Investor Services, you are considered the shareholder of record for those shares. As the shareholder of record, you have the right to vote your shares.

If your shares are held in a stock brokerage account or by a bank, or other holder of record, you are considered the beneficial owner of shares held in street name. Your broker, bank, or other holder of record is the shareholder of record for those shares. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares.

Morningstar, Inc. 2018 Proxy Statement

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How many votes are required to elect directors and adopt proposals?

The election of each director and ratification of the appointment of KPMG as our independent registered public accounting firm requires the affirmative vote of a majority of the shares of common stock represented in person or by proxy at the meeting and entitled to vote. A majority of the shares entitled to vote on a matter, whether present in person or by proxy, will constitute a quorum at the meeting.

How many votes am I entitled to per share?

Each share of our stock that you own represents one vote. If you do not vote your shares, you will not have a say on the important issues to be voted upon at the meeting.

How do I vote?

If you are a shareholder of record, you may vote in person at the meeting. If you do not wish to vote in person or if you will not be attending the meeting, you may vote by telephone, or over the Internet, by following the instructions provided in the Notice of Internet Availability of Proxy Materials. If you received a printed copy of the proxy materials, you may also complete, sign, and date your proxy card and return it in the prepaid envelope that was included with the printed materials.

If you are a beneficial owner of shares and you wish to vote in person at the meeting, you must obtain a proxy from your broker, bank, or other shareholder of record and present it to the inspector of election with your ballot. If you do not wish to vote in person or will not be attending the meeting, you may vote by following the instructions provided in the Notice of Internet Availability of Proxy Materials you received from the shareholder of record of your shares. If you received a printed copy of the proxy materials, you should have received a proxy card and voting instructions from the shareholder of record of your shares.

If you are a shareholder of record and submit a signed proxy card but do not fill out the voting instructions, the persons named as proxy holders will vote the shares represented by your proxy as follows:

·                  FOR the election of the directors listed in the proxy statement.

·                  FOR the ratification of the appointment of KPMG as our independent registered public accounting firm for 2018.

What happens if I abstain from voting on a matter or my broker withholds my vote?

For each matter to be considered at the meeting, abstentions are treated as shares that are represented and entitled to vote, so abstaining has the same effect as a negative vote. Shares held by brokers that do not have discretionary authority to vote on a particular proposal and that have not received voting instructions from their customers are not counted as being represented or entitled to vote on the proposal, which has the effect of reducing the number of affirmative votes needed to approve the proposal.

Should I submit a proxy even if I plan to attend the annual meeting?

To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the meeting in person. If you attend the meeting and are a shareholder of record, you may also submit your vote in person, and any previous votes that you submitted will be superseded by the vote that you cast at the meeting.

Can I revoke my proxy?

You may revoke your proxy at any time before the completion of voting at the meeting by voting in person at the meeting or by delivering written instructions before the meeting to our corporate secretary at Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602. If you are a beneficial owner, you must contact your broker, bank, or other holder of record to revoke any prior voting instructions.

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Who will bear the cost of soliciting votes for the annual meeting?

We will bear the expense of soliciting proxies. Our directors, officers, and other employees may also solicit proxies personally or in writing, by telephone, email, or otherwise. We do not compensate them for soliciting proxies. We are required to request that brokers and nominees who hold stock in their names furnish our proxy materials to the beneficial owners of the stock, and we must reimburse those brokers and nominees for the reasonable expenses of doing so in accordance with applicable law.

Will a live video stream of the annual meeting be available?

A link to the live video stream of the annual meeting will be available in the Investor Relations area of our corporate website at https://shareholders.morningstar.com in the Events & Presentations section.

Will a recording of the annual meeting be available?

You can view a video recording in the Investor Relations area of our corporate website at https://shareholders.morningstar.com in the Events & Presentations section, which will be available for approximately one year after the meeting.

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Proposal 1:
Election of Directors

Our nominees for election as directors include eight independent directors, as defined in the applicable rules for companies traded on the Nasdaq Global Select Market (Nasdaq), and two members of our senior management team. Each director serves a one-year term, as described below, with all directors subject to annual election. All of the nominees 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 18, 2018 and ending with the annual meeting to be held in 2019 or 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.

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.

As the founder and controlling shareholder of the company, Joe Mansueto’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 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.

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He 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 Kapoor 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 has been vice president and chief investment officer of United Technologies Corporation, a diversified company providing high-technology products and services to the global aerospace and building systems industries, 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 vice president and chief investment officer of United Technologies Corporation, Robin Diamonte has extensive experience in the retirement industry. Her expertise is a great asset to our growing retirement 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 Francis 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 SEC rules.

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 currently serves as a member of the board of directors of Zayo Group Holdings, Inc. He formerly served on the board of trustees of the Columbia Acorn Funds and on the board of directors of Accretive Health, Inc.

Steve Kaplan 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. Steve also currently serves on the board of another public company.

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. 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.

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Gail Landis 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 clients.

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. and The Nasdaq Stock Market LLC, and five affiliated exchanges, all wholly owned subsidiaries of the Nasdaq, 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 Lyons 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.

Jack Noonan

Jack Noonan served as a member of our advisory board beginning in 1998 and was elected to the Board in August 1999. He is a private investor and served as transition executive of International Business Machines Corporation, a leading manufacturer of information technologies, from October 2009 to December 2009. From January 1992 to October 2009, he served as president and chief executive officer of SPSS Inc., a software company specializing in predictive analytics. From January 2008 to October 2009, he also served as chairman of the board of directors of SPSS Inc. He formerly served as a member of the board of directors of Lionbridge Technologies, Inc. and Fleetmatics Group PLC.

As the former chief executive officer of a public company, Jack Noonan offers a wealth of management and business experience. Jack’s exposure to the complex issues facing a global software provider makes him a valuable member of our Board.

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 president and general manager of the online channel 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 Rosetta Stone Inc. She formerly served as a member of the board of directors of 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 Tsay 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.

Hugh Zentmyer

Hugh Zentmyer was appointed to the Board in January 2010. He served as executive vice president of Illinois Tool Works Inc., a diversified manufacturer of industrial systems and components, from 1995 until his retirement in January 2009. He holds a bachelor’s degree in accounting from the University of Cincinnati and a master’s degree in business administration from Xavier University.

With his years of experience working at a large decentralized company, Hugh Zentmyer brings to the Board his understanding of what makes businesses work effectively and efficiently. He has experience leading businesses with worldwide operations that market their products through multiple channels.

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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. 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. The current Board members include eight independent directors and two members of our senior management team.

Independent Directors

Each of our director nominees, other than Joe Mansueto and Kunal Kapoor, qualifies as independent under Nasdaq requirements. Paul Sturm, who served as a director until the 2017 annual meeting, also qualified as independent under Nasdaq requirements. 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 is or was 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 United Technologies Corporation, where she is vice president and 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, 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 $25 million to be paid over time by Joe Mansueto to support the construction of a library at The University of Chicago, where Steve is a professor. For Bill Lyons, the Board considered ordinary course transactions between the company and The Nasdaq Stock Market LLC, where he is a director. Gail Landis, Jack Noonan, Caroline Tsay, and Hugh Zentmyer do not, and Paul Sturm did not, have any relationships involving the company other than their positions as members of the Board.

The Board has determined that each member of the Audit Committee qualifies as independent under special standards established by the Securities and Exchange Commission (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 and also under the Internal Revenue Code 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;

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·                  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. Joe decided to step 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. In the past, the Board felt that combining the positions of chairman of the board and chief executive officer was in the best interest of the company. But the Board is confident that the current structure, which combines Joe’s unparalleled knowledge of all aspects of the business and its history as founder and controlling 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.

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. Management identifies and prioritizes enterprise-wide risks. Each year, the full Board receives a presentation by management on enterprise risk, including operational, financial, legal and regulatory, strategic, and reputational risks. 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 taken into account 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

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·                  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 five meetings in 2017. 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. In 2017, 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 then in office attended our 2017 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 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 2017.

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 32.

Compensation Committee

The Compensation 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, 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. 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 its authority to a subcommittee of the Compensation Committee. The Compensation Committee may engage its own outside advisors as it deems

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appropriate. The Compensation Committee did not retain an independent compensation consultant during 2017. We discuss additional information about the Compensation Committee, its activity during 2017, 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 marketing, finance, and other disciplines relevant to the success of a publicly traded company; understanding of our business; education and professional background, including 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 2017, we did not use a search firm or pay fees to other third parties in connection with seeking or evaluating Board nominee candidates. 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.

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 are currently serving 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 are not currently serving 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 her to review the correspondence prior to forwarding it and, in her discretion, not to forward certain items if she deems them to be of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration. In these cases, she may forward some of the correspondence elsewhere in the company for review and possible response.

Proxy Access

We recently amended our by-laws to adopt proxy access provisions that we believe serve the interests of our shareholders. Our by-laws now 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

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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.

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.

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.

The Investor Relations area of our corporate website at https://shareholders.morningstar.com also includes our Code of Ethics, which has been adopted by the Board and is applicable to each director.

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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 2017, each non-employee director received an annual retainer of $30,000. Non-employee directors who are members of the Audit Committee, Compensation Committee, or Nominating and Corporate Governance Committee received an additional annual retainer of $5,000, except for Gail Landis who received an additional annual retainer of $10,000 for serving on the Nominating and Corporate Governance Committee due to her oversight role on the Regulatory Governance Board of Morningstar Credit Ratings LLC, a nationally recognized statistical rating organization and one of the company’s subsidiaries. The Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair received an annual retainer of $25,000, $10,000, and $10,000, respectively. In addition to the retainers described above, we reimburse our non-employee directors for travel expenses for attending Board and committee meetings.

Equity-Based Compensation

In 2017, each of our non-employee directors received an annual grant of restricted stock units covering shares with a value of $130,000 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 $250,000 at grant, also vesting over a period of three years.

2017 Directors’ Compensation

The following table shows compensation earned by each of our non-employee directors in 2017. 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.

(1) As required by relevant SEC rules, the amounts represent the aggregate grant date fair value for restricted stock unit awards granted in 2017 as determined pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (FASB ASC Topic 718). See Note 12 of the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of the relevant assumptions used in calculating these amounts. As of December 31, 2017, our non-employee directors held the following number of restricted stock units: Robin Diamonte 3,764; Cheryl Francis 3,350; Steve Kaplan 3,350; Gail Landis 3,350; Bill Lyons 3,350; Jack Noonan 3,350; Caroline Tsay 3,323; and Hugh Zentmyer 3,350. Stock awards when granted are rounded down to the nearest whole share.

(2) Paul Sturm resigned from the Board at the annual meeting on May 12, 2017.

(3) Caroline Tsay was elected to the Board at the annual meeting on May 12, 2017.

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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, 2018 by each of our directors, each of the current and former 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 following table is based on 42,560,284 shares of our common stock outstanding as of March 1, 2018.

* Represents beneficial ownership of less than 1%.

(1) Joe Mansueto’s address is c/o Morningstar, Inc., 22 West Washington Street, Chicago, Illinois 60602. Joe has pledged 1,800,000 shares of our common stock as security under the terms of a bank credit agreement. Includes 258,366 shares of our common stock held by the Mansueto Foundation, a private charitable foundation.

(2) Includes 8,000 shares of common stock issuable upon exercise of stock options exercisable by April 30, 2018 and 21,107 shares of common stock held by Bevin’s spouse.

(3) Includes 2,316 shares of common stock issuable upon exercise of stock options exercisable by April 30, 2018.

(4) Includes 2,316 shares of common stock issuable upon exercise of stock options exercisable by April 30, 2018.

(5) Includes 2,316 shares of common stock issuable upon exercise of stock options exercisable by April 30, 2018 and 7,500 shares of common stock as to which Bill has shared voting and investment power.

(6) Includes 2,316 shares of common stock issuable upon exercise of stock options exercisable by April 30, 2018 and 1,000 shares of common stock held by Jack’s spouse.

(7) Includes 2,316 shares of common stock issuable upon exercise of stock options exercisable by April 30, 2018.

(8) Includes 19,580 shares of common stock as to which directors and executive officers have the right to acquire beneficial ownership by April 30, 2018.

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(9) The indicated interest is based solely on a Schedule 13G filed on February 14, 2018 by Eaton Vance Management (EVM), a registered investment adviser, whose business address is 2 International Place, Boston, MA 02110. In its Schedule 13G, the reporting persons reported ownership as of December 31, 2017 as follows:

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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 identified in the following table in 2017. We refer to this group as the named executive officers, and the group includes our chief executive officer, each person who served as our chief financial officer during 2017, and our three other most highly compensated executive officers.

In March 2017, Stéphane Biehler resigned as chief financial officer. Kunal Kapoor, our chief executive officer, served as interim chief financial officer until we appointed Jason Dubinsky as chief financial officer in July 2017.

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 equity-based and incentive compensation through the Morningstar 2011 Stock Incentive Plan (the Stock Incentive Plan) and the Morningstar Incentive Plan (the Corporate Incentive 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.

The Compensation Committee does not use rigid formulas to determine executive compensation but nevertheless aims to tie 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. The Compensation Committee relies on its judgment in determining the amounts and combination of base salary, annual bonus, and equity awards. In 2017, the Compensation Committee did not retain a compensation consultant to advise it on executive compensation.

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 setting 2017 compensation, the Compensation Committee compared the total compensation of our executives with compensation for executives at the following companies:

In 2017, we added CBOE Holdings, Inc. and Envestnet, Inc. to the peer group and removed Dun & Bradstreet Corporation, Equifax Inc., and Gartner, Inc. from the peer group to better align the peer group’s size and business to Morningstar. In addition, Advent Software, Inc. and Solera Holdings Inc. were removed from the peer group because they are no longer publicly traded.

The Compensation Committee also evaluated published survey data provided by the Equilar, Culpepper, McLagan, Radford, and Willis Towers Watson compensation surveys. These surveys provide information about compensation levels and practices at financial services, technology, and general industry 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.”

Changes to 2017 Executive Compensation Program

In 2017, the Compensation Committee shifted to awarding market stock units rather than performance shares under the company’s long-term incentive award program. The market stock units vest three years from the grant date depending on the company’s total shareholder return over that three-year period. The Compensation Committee chose to use total shareholder return as the metric for determining vesting levels because it believes this metric incentivizes our management team to create long-term shareholder value. The Compensation Committee also wanted to avoid redundancy with the metrics used under the Corporate Incentive Plan. We discuss additional information about the market stock units below under Market Stock Units.

“Say on Pay” Vote

The company provides its shareholders with an opportunity to cast an advisory “say on pay” vote on executive compensation once every three years. The company held its last say on pay vote at its 2017 Annual Shareholders’ Meeting, and the proposal was approved with approximately 87% of the votes cast in support of the proposal. The Compensation Committee did not make any changes to the company’s executive compensation program in response to the 2017 say on pay vote. The company will conduct its next say on pay vote at its 2020 Annual Shareholders’ Meeting.

2017 CEO Compensation

Consistent with the company’s overall compensation philosophy, the Compensation Committee and Board believe that variable incentive pay and equity awards should make up a larger portion of Kunal’s compensation as chief executive officer to align his interests with the long-term interests of our shareholders. In anticipation of Kunal’s appointment to chief executive officer in January 2017, Willis Towers Watson conducted a competitive compensation analysis for the chief executive officer role using 2016’s compensation peer group. The analysis also included data regarding the compensation for a number of newly appointed chief executive officers who succeeded chief executive officers who were also founders. Based on the Board’s review of the analysis prepared by Willis Towers Watson and other factors, the Board established Kunal’s target total compensation at the levels it felt appropriate for a new and first-time chief executive officer, with an emphasis on recognizing his promotion to chief executive officer with increases to his target variable incentive pay levels and equity levels rather than base salary adjustments.

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The Compensation Committee will continue to monitor and manage the progression of his target total compensation over time based on his performance. The Board approved Kunal’s 2017 compensation as chief executive officer as set forth below:

At the time the Board approved Kunal’s 2017 compensation, it approved Kunal’s participation in the company’s equity compensation program, with an annual grant of at least $750,000, while retaining discretion to increase the annual equity grant level in future years based on its assessment of Kunal’s performance and market practices for the position. Based on Kunal’s performance during 2017, for 2018, the Compensation Committee approved an annual equity grant to Kunal with a target value of $1 million, which will be allocated equally between market stock units and restricted stock units.

CFO Compensation

As noted above, Jason Dubinsky became our chief financial officer in July 2017. Based on the Compensation Committee’s review of market practices for the position, the company’s overall compensation philosophy, and the fact that Jason forfeited certain compensation provided to him by Walgreens Boots Alliance, his prior employer, the Compensation Committee established Jason’s target total compensation at the levels it felt appropriate for the position. The Compensation Committee approved Jason’s compensation as chief financial officer as set forth below:

(1) Jason’s annual target bonus for 2017 was $500,000, which was pro-rated to $220,548 based on his hire date.

In recognition of the fact that Jason forfeited certain compensation provided to him by his prior employer, he also received a cash award of $380,000 in connection with the commencement of his employment, which is subject to repayment in the event of a voluntary termination of employment or a termination for cause prior to the first anniversary of his start date.

In 2018, Jason is eligible to receive an annual grant of restricted stock units with a target value of $475,000 and an annual grant of market stock units with a target value of $225,000.

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

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long-term incentives. This mix of equity and cash compensation is intended to align our executive officers with 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 2017, the Compensation Committee elected to not increase the base salaries for named executive officers that were in place in 2016. Bevin Desmond elected to voluntarily reduce her base salary in 2017 due to her going temporarily to a reduced work schedule.

Annual Incentives: The Corporate Incentive Plan rewards participants for meeting and exceeding annual performance goals approved by the Compensation Committee. 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 based on an assessment of the individual’s achievements and feedback from Kunal about the individual’s performance and overall contribution to the company.

In early 2017 the Compensation Committee established a performance-based compensation measure of 0.9% of operating income before bonus expense (i.e., operating income plus bonus expense) for each named executive officer. This measure set the maximum potential bonus for each named executive officer at $2,034,552. Under the design of the Corporate Incentive Plan, the Compensation Committee has the ability to reduce the bonus payout based on overall company and individual performance. We describe how the Compensation Committee exercised this discretion below.

2017 Bonus Target and Bonus Determinations for Named Executive Officers: In December 2016, the Compensation Committee approved the 2017 bonus targets for each of our then-serving named executive officers. The Compensation Committee approved Jason’s 2017 bonus target in connection with the approval of his compensation package in June 2017. Kunal’s 2017 bonus target was set at 243% of his base salary and the 2017 bonus targets for the other named executive officers ranged from approximately 83% 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 results 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 performance for the annual cash incentive bonuses in 2017. The Compensation Committee determined payouts for 2017 primarily on financial performance, using a formula that measured adjusted revenue and adjusted EBITDA relative to company 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 2017, the Compensation Committee established a funding formula that specifies bonus funding based on various performance levels. The same formula is used for adjusted revenue and adjusted EBITDA, with the final payout factor being weighted 50% for adjusted revenue and 50% for adjusted EBITDA.

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The graphic below illustrates how this formula works:

2017 Bonus Funding Formula

In 2017, our financial performance resulted in the following calculation of the bonus funding factor and final payout factor:

Morningstar Final Funding Factor (For All Named Executive Officers)

Managed Portfolios Final Funding Factor (For Daniel Needham)

Each executive’s bonus target was multiplied by the final payout 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 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 as well as how the Compensation Committee evaluated performance against those goals. The table below shows the

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target earned by each of our named executive officers based on the achievement of financial goals and the adjustments made for individual performance.

(1) Kunal will receive $113,050 of the $850,000 in the form of restricted stock units to be granted on May 15, 2018 and that vest in full on the first anniversary of the grant date.

(2) Jason’s annual bonus target for 2017 was $500,000, which was prorated to $220,548 based on his hire date.

(3) The target bonus for Daniel under the Corporate Incentive Plan was set at 67% of his base salary, which was funded based on 50% of the Morningstar Final Funding Factor and 50% of the Managed Portfolios Final Funding Factor. The Funding Factor noted for Daniel represents the combined Funding Factor for the Morningstar Final Funding Factor and the Managed Portfolios Final Funding Factor.

(4) Daniel is the only named executive officer who participated in an Investment Management bonus plan which is linked to the risk-adjusted long-term performance of approximately 160 of our managed investment strategies relative to established benchmarks for each investment strategy. Daniel’s target bonus under the Investment Management bonus plan was set at 33% of his base salary, or $99,000. The performance ranges and corresponding payouts for each of our managed investment strategies were established around excess return targets that were greater than the returns of the benchmarks over two time periods. Based on the long-term risk-adjusted outperformance of our managed investment strategies during 2017, Daniel’s payout under the Investment Management bonus plan was $142,467, or 143.9% of target.

We describe the factors affecting the individual performance adjustment for each of our current named executive officers who participated in the Corporate Incentive Plan in more detail below.

Kunal Kapoor: Kunal’s key goals included driving our overall financial results, leading the execution of our strategy with a focus on widening the moat around our data and research assets, improving long-term investment performance in our investment management offerings, increasing the breadth and depth of our relationships with financial advisors and retirement plan recordkeepers, sponsors, and participants, and driving growth in our core software platforms including Morningstar Direct and PitchBook. He was also tasked with leading the integration of PitchBook, scaling key aspects of our business infrastructure, including our marketing, sales, and service capabilities and our technology systems, and developing his team and strengthening leadership and accountability throughout the organization.

In 2017, Kunal and his team made significant progress towards all of these key goals. Although the company landed just short of its revenue and EBITDA goals as described above, Kunal and his team delivered solid business performance with strong revenue and cash flow growth, the achievement of meaningful accomplishments and growth in our core areas of investment, and the laying of a strong sales and product foundation for 2018. On the data and research front, they made significant progress in developing and delivering new and enhanced research offerings and data sets, including the expansion of our ratings footprint to include quantitative ratings for funds and the further development of our public and private equity datasets. Kunal and his team also responded rapidly to clients’ needs on the regulatory front, delivering unique solutions in a timely and impactful manner to clients responding to MiFID II in Europe and best interest requirements in the United States. Kunal successfully aligned the sales and marketing teams and established critical sales and marketing infrastructure resulting in sales results that meaningfully exceeded targets. PitchBook’s integration progressed well under Kunal’s leadership in 2017, continuing the solid execution of its business plan and exceeding its targets. He also provided strong leadership to the finance organization during the transitional period he served as interim chief financial officer. Additionally, Kunal built his team and provided able direction and support to new executive leadership in sales, technology, product, and finance. Based on these factors, the Compensation Committee

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determined that Kunal’s individual performance adjustment be 115% of his final payout factor, which resulted in a bonus of $850,000. Kunal received $736,950 in cash based on the company funding rate of 86.7% and the remaining $113,050 in restricted stock units to be granted on May 15, 2018. The restricted stock units vest in full on the first anniversary of the grant date.

Jason Dubinsky: Given that Jason joined us in July 2017, his goals were largely based on building his knowledge of the company and our operations, evaluating the global finance organization and financial processes, and establishing a vision and series of goals for the finance function.

During the second half of 2017, Jason effectively assumed control of our global finance organization and began implementing changes and enhancements to realize his goals for it. Jason also contributed to and meaningfully influenced a number of projects including the financial integration of PitchBook, oversight of key procurement and expense areas, and analysis of potential investments. He also led the 2018 budgeting and planning process successfully. Based on these factors, Kunal recommended to the Compensation Committee that Jason’s individual performance adjustment be 100% of his final payout factor.

Bevin Desmond: Bevin’s key goals included improving the efficiency and quality of the delivery of human resources services globally, evolving our global rewards program to ensure it continues to support business goals, raising the visibility of opportunities for long-term career growth within the organization, fully articulating and ensuring internal and external awareness of our employee value proposition, and facilitating access to organizational data and analytics for decision-making in terms of employee hiring, promotion, compensation, and engagement.

In 2017, Bevin and her team completed the globalization of a human resources operations model that increased the quality, consistency, and efficiency of the services provided to employees and managers, introduced a new employee stock ownership program and updated aspects of the annual bonus program, and introduced new organizational employee performance and engagement metrics and measurement systems. While focusing on overall improvements to the employee experience, Bevin and her team also introduced educational programming to help managers develop and grow as leaders, and to be more effective in driving high-performance while also addressing employee needs. Led by Bevin, our talent and culture organization has driven an organization-wide use of data insights to model our hiring, compensation, and diversity efforts. Additionally, Bevin had extensive involvement in the hiring process for several key leadership positions during the year and played a critical role in ensuring a smooth CEO transition in 2017. Based on these factors, Kunal recommended to the Compensation Committee that Bevin’s individual performance adjustment be 100% of her final payout factor.

Danny Dunn: Danny’s key goals included establishing and leveraging a tighter integration of his sales team with the marketing, product, and finance functions to drive sales growth, instilling a high-urgency, high-accountability mindset in the sales organization worldwide, driving greater levels of client satisfaction, and ultimately achieving the company’s sales and revenue targets.

In 2017, Danny designed and implemented improved sales management methodologies and processes, with more attention to regular cadence and forecasting. In support of a new selling approach, he led the team toward substantive improvements in its sales support technology, human resources-related practices, education and training programs, and rewards and recognition programs. Danny’s work led to outstanding sales results that meaningfully surpassed targets. Based on these factors, Kunal recommended to the Compensation Committee that Danny’s individual performance adjustment be 121% of his final payout factor.

Daniel Needham: Daniel’s key goals included achieving the financial goals set forth for the investment management business, improving the investment performance of portfolios and strategies managed by the company and increasing net asset flows into those portfolios, strengthening overall client satisfaction, and boosting team engagement.

In 2017, Daniel drove overall revenue growth in the investment management business while investing in the business in a manner that supports sustainable long-term growth. His focus on risk-adjusted investment performance resulted in overall improvement to the number of portfolios that beat their respective benchmarks over longer-term periods, which in turn helped

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support growth in net asset flows. Daniel focused with his team on providing transparency regarding progress and challenges, which helped ensure a strong sense of accountability and engagement within the business. He has successfully focused and globalized this business. Based on these factors, Kunal recommended to the Compensation Committee that Daniel’s individual performance adjustment be 100% of his final payout factor.

Equity-Based Compensation

The Stock Incentive 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 Stock Incentive 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 2017, we granted restricted stock units and market stock units to our named executive officers. Restricted stock units were granted to our named executive officers, other than Jason, in May. With respect to market stock units, the Compensation Committee elected to grant one-half of each named executive officer’s, other than Jason’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 2017, the Compensation Committee granted restricted stock units to our named executive officers. The table below shows the approximate value approved for each named executive officer in 2017 and 2016.

As noted above under 2017 CEO Compensation, we increased the value of Kunal’s 2017 restricted stock unit award because of his promotion to chief executive officer in January 2017.

Market Stock Units: As described above under Changes to 2017 Executive Compensation Program, the Compensation Committee modified the company’s long-term incentive award program by shifting from awarding performance shares with a three-year performance period to market stock units that vest three years from the grant date depending on our total shareholder return (TSR) over that three-year period. The Committee converted the existing performance share targets into market stock unit targets by basing the new targets on the expected economic value of the existing performance share targets. The table below shows the 2017 targeted value for each named executive officer.

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For our named executive officers other than Jason, the Compensation Committee granted one-half of the 2017 targeted value on May 15, 2017 and the other half on November 15, 2017. The Committee granted all of Jason’s market stock units on November 15, 2017.

The market stock units vest based on our TSR over the three-year performance period, as shown in the table below.

In addition to the market stock unit grants described above, the Compensation Committee made additional incremental market stock unit grants in 2017 to each named executive officer, other than Jason, to encourage retention and provide enhanced motivation across this group. The Committee granted one-half of the 2017 incremental market stock units on May 15, 2017 and the other half on November 15, 2017. The table below shows the 2017 incremental targeted value received by each named executive officer.

2015 Performance Share Award Payout: In 2015, the Compensation Committee granted performance shares to each of our named executive officers, other than Jason and Danny, who were not employees at the time. Under the 2015 performance share awards, we measured performance over a three-year performance period from January 1, 2015 through December 31, 2017 by assessing our cumulative revenue and EBITDA generated during the performance period, with 70% of the award based on cumulative revenue achievement and 30% based on cumulative EBITDA achievement. After the conclusion of the three-year performance period, the Compensation Committee determined that the company achieved adjusted cumulative revenue of $2.57 billion, which was below the threshold performance level of $2.67 billion, and cumulative EBITDA of $778.7 million, which was below the threshold performance level of $783.2 million, and resulted in a zero payout for the performance shares granted in 2015 for all of the participating named executive officers.

Employment Agreements, Change in Control Arrangements, and Deferred Compensation

We do not have any employment agreements, termination agreements, or change-in-control agreements with any of our executive officers. Stéphane Biehler did not receive any compensation in connection with his departure from the company and all of his unvested equity award terminated as a result of his departure.

If there is a change in control of Morningstar, the Compensation Committee can vest or make exercisable, as the case may be, unvested or not yet exercisable awards granted under the Stock Incentive Plan. The following events constitute a change in control within the meaning of the Stock Incentive Plan: the acquisition by a person or entity of more than 50% of Morningstar’s common stock, other than by Joe Mansueto, his wife, children, or any trustee or custodian on their behalf; a merger, consolidation, or statutory share exchange involving Morningstar, unless shareholders receive more than 60% of the stock of the surviving company or the parent company; a liquidation or dissolution of Morningstar; or a sale of substantially all of Morningstar’s assets. The Compensation Committee has not determined how it will exercise its discretion if there is a change in control of Morningstar.

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If there had been a change in control of Morningstar on December 31, 2017, and the Compensation Committee accelerated vesting, the market value on that date of the shares subject to unvested restricted stock units that would have vested for the benefit of each of our named executive officers would have been:

If there had been a change in control of Morningstar on December 31, 2017, and the Compensation Committee accelerated vesting, the market value on that date of the shares subject to unvested market stock units that would have vested at the target performance level for the benefit of each of our named executive officers would have been:

If there had been a change in control of Morningstar on December 31, 2017, and the Compensation Committee accelerated vesting, the market value on that date of the shares subject to unvested performance shares that would have vested at the target performance level for the benefit of each of our named executive officers would have been:

None of our executive officers hold any unvested stock options that would have been accelerated upon a change in control of Morningstar.

Other than our 401(k) plan, we do not have any plans that permit executive officers to defer salary or bonus.

Stock Ownership Requirements

The Board has adopted stock ownership requirements for our executive officers and directors. These guidelines are designed to encourage our executive officers and directors to increase their equity stakes in Morningstar and more closely link their economic interests with those of our shareholders. We require each of our executive officers and directors to hold either shares with a value of $5,000,000 or generally speaking, a number of Morningstar shares and share equivalents that is at least the sum of 12.5% of the total number of exercisable stock options and 25% of the total number of vested restricted stock units and vested performance shares that he or she has been granted. As of March 1, 2018, our executive officers and directors were in compliance with these requirements. We describe our stock ownership requirements for executive officers and directors in more detail on the Investor Relations area of our corporate website at https://shareholders.morningstar.com in the Governance section.

Anti-Hedging Policy

Our Code of Ethics prohibits employees from engaging in short sales of Morningstar’s common stock and transactions in publicly traded options in Morningstar’s common stock (such as puts, calls, and other derivative securities) on an exchange or in any other organized market and from entering into derivative or hedging transactions intended to reduce their risk of owning Morningstar securities, while still maintaining ownership of such securities.

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Compensation Committee Report

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussions, the Compensation Committee recommended to the Board the inclusion of the Compensation Discussion and Analysis in Morningstar’s proxy statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Compensation Committee

Steve Kaplan, Chair
Cheryl Francis
Bill Lyons
Jack Noonan
Hugh Zentmyer

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or the compensation committee of any other company that has any executive officers serving as a member of our Board or compensation committee.

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Executive Compensation

The following table shows compensation for our named executive officers. No compensation information is provided for Jason and Danny for 2015 and 2016 because they were not named executive officers during those years.

2017 Summary Compensation Table

(1) As required by relevant SEC rules, the amounts represent the aggregate grant date fair value for restricted stock unit awards and market stock units granted in 2017 as determined pursuant to FASB ASC Topic 718. The amounts included for the market stock units are calculated based on the probable satisfaction of the performance condition for these awards as of the grant date. Under FASB ASC Topic 718, the vesting condition related to the total shareholder return (TSR) market stock units is considered a market condition and not a performance condition. Accordingly, there is no grant date fair value below or in excess of the amount reflected in the table above for the named executive officers that could be calculated and disclosed based on achievement of the underlying market condition. See Note 12 of the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of the relevant assumptions used in calculating these amounts. For further information on these awards, see the 2017 Grants of Plan-Based Awards table beginning on page 27 of this Proxy Statement.

(2) The amounts represent annual bonus payments made under the Corporate Incentive Plan and, in the case of Daniel Needham, the Investment Management bonus plan. For further information on these payments, see Compensation Discussion and Analysis—Annual Incentives.

(3) For 2017, the amounts shown represent the following:

(a) The amount shown consists of tax preparation fees.

(4) Kunal will receive $113,050 of the $850,000 in the form of restricted stock units to be granted on May 15, 2018 and that vest in full on the first anniversary of the grant date.

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(5) In early March 2017, Stéphane Biehler resigned as chief financial officer. Kunal Kapoor served as interim chief financial officer until we appointed Jason Dubinsky as chief financial officer in July 2017.

(6) The amount shown represents a cash award of $380,000 in connection with the commencement of Jason’s employment.

2017 Grants of Plan-Based Awards

The following table shows information concerning the grant of plan-based awards in 2017 to each of our named executive officers.

(1) Except as noted in footnote 8, amounts shown represent the Corporate Incentive Plan bonus target for each participating named executive officer established by the Compensation Committee. The Corporate Incentive Plan does not include specified threshold or maximum payout levels.

(2) Amounts shown represent the target and maximum market stock units granted under the Stock Incentive Plan. These market stock units vest on the third anniversary of the grant date depending on our total shareholder return (TSR) over that three-year period. The number of shares of our common stock to be received at vesting will range from 0% to 150% of the target amount based on the company’s TSR for the three-year performance period. At threshold performance, none of the shares vest. At target performance, the target number of shares would vest. At maximum performance, 150% of the target number of shares would vest.

(3) Amounts shown represent the aggregate grant date fair value for each restricted stock unit grant, market stock unit grant, and stock grant made in 2017 as determined pursuant to FASB ASC Topic 718. The amounts included for the market stock units are calculated based on the probable satisfaction of the performance condition for these awards as of the grant date. See Note 12 of the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of the relevant assumptions used in calculating this amount.

(4) Amounts shown consist of restricted stock units granted under the Stock Incentive Plan. Except for the restricted stock units granted to Kunal and the first of Jason’s grants of restricted stock units listed above, these restricted stock units vest in four equal annual installments beginning on the first

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anniversary of the grant date. Kunal’s grant vests in five equal annual installments beginning on the first anniversary of the grant date. Jason’s first-listed grant vests half on the first anniversary of the grant date and half on the second anniversary of the grant date.

(5) Jason’s annual target bonus for 2017 was $500,000, which was pro-rated to $220,548 based on his hire date.

(6) Amount shown consists of a one-time stock inducement award valued at $500,000, which was fully vested on the grant date.

(7) Stéphane forfeited his 2017 bonus in connection with his departure from the company.

(8) Amounts shown represent the threshold, target, and maximum payout levels for Daniel Needham under the Investment Management bonus plan.

2017 Outstanding Equity Awards at Fiscal Year-End