Ascertain Client Voting Preferences

Resolution Text

RESOLVED: T. Rowe Price Group, Inc. (“TROW” or “Company”) shareholders request our Company prepare a report on the reputational and financial risks to the Company of misalignment between proxy votes it casts on behalf of clients and its client’s values and preferences, as well as strategies for addressing such misalignments on important issues. The requested report shall be available to stockholders and investors by October 1, 2024, prepared at reasonable cost and omitting proprietary information.

SUPPORTING STATEMENT:

Controversy over proxy voting – especially over environmental, social, and governance (“ESG”) proposals – is regularly reported on, debated, and enshrined in state law.1

Much debate centers on intermediaries, such as TROW, and their role in casting votes for beneficial owners. Every vote opens TROW to controversy, either for failing to adhere to ESG principles or being too “woke.”

The issue has made its way to the highest levels of government. A proposed bill would require asset managers to pass votes through to investors under certain conditions.2 President Biden’s first veto was about ESG factors in retirement plans.3

The landscape has clearly shifted: TROW can no longer execute votes in the best interests of clients (and avoid controversy) without first soliciting their preferences4 on important social/environmental topics and determining if they are subject to legal mandates related to proxy voting. TROW’s one-size-fits-all approach of maximizing shareholder value5 is at odds with many clients’ interests in maximizing portfolio-wide returns through voting strategies that push certain companies to address social and environmental externalities.

Votes are now filed in machine-readable format, making it easier to identify votes misaligned with client preferences.6 TROW’s N-PX filings reveal a clear pattern in favor of management and against shareholder proposals, irrespective of the topic. For example, TROW only supported 8% of shareholder proposals seeking disclosure of political activities and expenditures.7 In writing Citizens United, Justice Kennedy appeared to believe disclosure was required.8 Reliance on proxy advisors may invite further scrutiny.9

TROW offers portfolios based on individual client needs, but not proxy voting, a core responsibility subject to fiduciary duties.10

BlackRock, Vanguard, and State Street11 adopted programs providing voting choices. However, these are denounced as too limited due to overreliance on traditional proxy advisors.12 New technologies can tailor proxy voting on important issues such as climate change, diversity, executive pay, and political expenditures to the unique preferences and values of each investor.13

Investors want a voice. Approximately 83% of investors, irrespective of age, life stage, or ideology, want managers to consider their preferences when voting on environmental issues.14

Financial services companies that fail to engage clients on important voting preferences will be subject to ever-increasing legal and reputational jeopardy.

Vote to Ascertain Beneficial Owner Voting Preferences – Proposal [4*]

1 https://corpgov.law.harvard.edu/2023/03/11/esg-battlegrounds-how-the-states-are-shaping-the-regulatory-landscape-in-the-u-s/ 

2 https://www.sullivan.senate.gov/newsroom/press-releases/sullivan-introduces-index-act-to-empower-investors-and-neutralize-wall-streets-biggest-investment-firms 

3 https://www.nbcnews.com/politics/white-house/biden-issues-first-veto-congress-blocks-new-investment-rule-rcna72997 

4 https://ssrn.com/abstract=4360428 

5 https://www.troweprice.com/content/dam/trowecorp/Pdfs/proxy-voting-guidelines-TRPA.pdf

6 https://www.sec.gov/news/press-release/2022-198

7 https://www.troweprice.com/content/dam/trowecorp/Pdfs/esg/proxy-voting-summary-trpa.pdf 

8 https://www.corpgov.net/2013/04/review-citizens-disunited/ 

9 https://www.texasattorneygeneral.gov/sites/default/files/images/press/Utah%20%26%20Texas%20Letter%20to%20Glass%20Lewis%20%26%20ISS%20FINAL.pdf, https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357?mod=opinion_lead_pos1 

10 See 14 CFR 275.206(4)-6 and accompanying staff bulletins.

11 https://ssrn.com/abstract=4580206 

12 https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357 

13 https://ssrn.com/abstract=4360428 14 https://www.gsb.stanford.edu/sites/default/files/publication/pdfs/survey-investors-retirement-savings-esg.pdf