T. Rowe Price's report: “For or Against? The Year in Shareholder Resolutions—2023” largely reflects its company-specific approach to evaluating shareholder proposals in light of particular facts and circumstances and their alignment with long-term value creation.
Overall, for the period ended December 31, 2023, T. Rowe opposed 86% of environmental proposals, 96% of political spending and lobbying proposals, 97% of social proposals, and 100% of ESG counter-proposals, totaling 527 proposals of 1,921 voted.
Notably, consistent with statements made by other large institutional investors over the past few years, T. Rowe once again notes a decline in the quality of proposals coupled with an increase in proposal volume (attributed primarily to the SEC’s policy shift evidenced by Staff Legal Bulletin No. 14L) and prescriptiveness.
There are multiple reasons for this increase. In the U.S., the main driver was a 2021 decision by the Securities and Exchange Commission (SEC) to adapt its interpretation of what types of resolutions were eligible to be added to a company’s proxy. The SEC allowed more proposals across a wider range of environmental and social topics to move forward. Our observation is that the increase in the volume of proposals was accompanied by a decrease in their overall quality. Since the change in guidance from the SEC, we have consistently observed more inaccuracies in proposals, more poorly targeted resolutions, and more proposals addressing non‑core issues.
The reported “deterioration” in shareholder proposals over the past few years translates to less than half (~ 45%) of the 527 proposals covered by the report that T. Rowe deemed arguably designed (but not always necessary) to enhance shareholder value or reduce risk in relation to shareholder value creation-related practices vs. 55% of proposals that it considered to be aimed at meaningfully changing companies’ mix of business, raising awareness of particular social or environmental issues untethered from value creation, or motivated by considerations other than the company’s long-term performance.
The report provides voting data and associated insights on T. Rowe's overall approach to environmental and social-related (E&S) proposals and associated voting rationale, in addition to its instructive E&S proposal voting decision-making framework, which considers, among other factors, whether the proposal addresses a company-specific material issue, the identity of the proponents and their objectives, the proposal’s ask, and whether the ask is appropriately directed to the company and its shareholders.
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This post first appeared in the weekly Society Alert!