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As reported previously in this week's Society Alert, in a welcome development further signaling its increasing transparency, T. Rowe Price (TROW) posted this Statement articulating its investment philosophy on "shareholder activism," which it defines as: (i) publicly disclosed campaigns by significant, large investors declaring an intent to influence management or boards of directors on matters of strategy, capital allocation, management, and/or corporate governance; (ii) publicly disclosed, unsolicited offers from strategic buyers, private equity investors, or a consortium of these to acquire a company using a hostile approach; and (iii) proxy contests.

Key takeaways include:

• Although TROW affords a degree of deference to the targeted company's management based on its informational advantage, great ideas for creating sustainable value can originate within or outside the company. As such, companies should be open to considering and evaluating activists' and other externally generated ideas.
• TROW takes a multi-year view in assessing and making decisions about whether an activist's or management's approach is the best one for the company, i.e., is "likely to foster sustainable, long-term performance," based on activist campaign-specific and company-specific facts and circumstances.
• Although TROW rarely believes it should initiate an activism campaign, where a campaign has been initiated by an activist, it believes it should meaningfully participate in the process in those cases where it has a significant stake in the target company, in the interest of attaining the best outcome for its clients. In that context, the Statement sets forth this series of thoughtful principles that reportedly reflect its commitment to all parties involved: 
  

- TRANSPARENCY AND ACCESS: Once we have formed an opinion about an activist-related situation, we believe it is important to be transparent about our thought processes and conclusions. Generally speaking, both sides of a campaign can expect candid feedback from T. Rowe Price regarding the path we believe will lead to the best outcome. In the specific case of proxy contests, we will share our voting decision with both parties in the campaign in advance of the vote upon their request.

- INDEPENDENCE: The only criteria we use in determining the best course of action in activism campaigns are those related to the long-term interests of our advisory clients. We arrive at voting decisions in contested elections independently.

To the extent that the managers of multiple strategies own the same security but disagree about the issues before them in a proxy contest, they vote individually. It is not uncommon for T. Rowe Price portfolios to cast different votes on proxy matters.

- CLEAR COMMUNICATION: In situations where it is both appropriate and important for us to speak with other investors regarding an activism-related investment situation, we will do so.

Generally speaking, these engagements would include our industry analyst who follows the company, portfolio managers who own the investment in their clients’ portfolios, our head of corporate governance, internal legal counsel, or a combination of these.

Under T. Rowe Price policies, such engagement with other investors regarding activism campaigns should only take place under specific conditions: 

• When the activism campaign has been publicly disclosed, either through confirmed press reports or public filings;

• When the other investors acknowledge that we do not intend to form a group or act in concert with them;

• When T. Rowe Price is an existing, significant investor in the company; and
• When the subject of the discussion is a single, known activism campaign, not the potential actions the investor may initiate in the future.