T. Rowe Price released proxy voting summaries for the 12-month period ended June 30, 2023, for T. Rowe Price Associates, Inc. (TRPA) and T. Rowe Price Investment Management, Inc. (TRPIM), a recently established, separate U.S.‑based, SEC‑registered investment adviser. The summaries largely reflect a company-specific approach to evaluating proxy proposals in light of particular facts and circumstances and consistent with TRPA’s and TRPIM’s proxy voting guidelines.
Overall, TRPA supported management on 87% of shareholder proposals and 88% of management proposals, and TRPIM supported management on 79% of shareholder proposals and 91% of management proposals, globally, on the most prevalent and significant voting issues.
Notably, consistent with observations made by other institutional investors including, most recently, BlackRock and Vanguard, T. Rowe notes the decline in quality of shareholder proposals coupled with the substantially increased volume, which is attributed in part to the SEC’s November 2021 policy shift reflected in SLB No. 14L.
TRPA Report
Our observation is that the increase in the volume of proposals resulted in a decrease in their overall quality. We observed more inaccuracies in proposals, more poorly targeted resolutions, and more proposals addressing non-core issues. In addition, we observed a marked increase in the level of prescriptive requests. Proponents moved swiftly from disclosure-based requests seeking additional reporting on environmental, social, and governance (ESG) matters to action-based requests seeking specific commitments, capital investments, or structural changes from the targeted companies. Our view on these prescriptive proposals is that they usurp management’s responsibility to make operational decisions and the Board’s responsibility to guide and oversee such decisions. Our overarching framework for determining how to vote on these proposals uses an economically centered, returns-focused lens. We do not believe it is consistent with our investment management duties to support proposals that, intentionally or not, are designed to impose burdensome requirements on the corporation that have no clear path to long-term value creation.
As was the case with BlackRock and Vanguard, T. Rowe also commented on improved disclosure by companies of decision-relevant information on E&S issues: “Another important development over the past three years is the pace at which issuers have collected and disclosed decision-relevant data on environmental and social considerations. When a company’s ESG disclosures are comprehensive and quantitative enough to meet our needs as investment managers, we are less inclined to support shareholder resolutions seeking additional reporting.”
The reports provide voting data and associated insights on TRPA’s and TRPIM’s approach across a number of key topics, including social, environmental, and political proposals, director elections, executive compensation, broad-based equity compensation plans, poison pills and other takeover defenses, and board leadership.
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This post first appeared in the weekly Society Alert!