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T. Rowe shareholder proposals rejected at annual meeting

From left, Edward Bernard, vice chairman, Bill Stromberg- CEO and Brian Rogers, chairman of the board, speaking at the T. Rowe Price annual shareholders meeting.

From left, Edward Bernard, vice chairman, William Stromberg, CEO, and Brian Rogers, chairman of the board, speak at the T. Rowe Price annual shareholders meeting. (Maximilian Franz)

T. Rowe Price shareholders rejected shareholder proposals to issue reports about climate change, executive compensation and diversity at Wednesday’s annual meeting at the company’s Owings Mills campus.

On climate change and executive compensation, at issue were how the company proxy votes its shares of other companies.

The Sundance Family Foundation asked shareholders to start the process of a report on the company’s proxy voting policies related to climate change.

“(T. Rowe’s) voting practices appear inconsistent with its policies and statements addressing climate change and pose reputational risk for the company,” the proposal said. “Moreover, proxy voting practices that ignore climate change fail to recognize significant company-specific and economy-wide risks associated with negative impacts of climate change.”

The company’s board of directors recommended a vote against the proposal, citing the company’s efforts to reduce its carbon footprint by installing solar panels on the Owings Mills campus, and saying that a policy on proxy votes to remain consistent with fiduciary duties to investors.

Similarly, a proposal by The Gun Denhart Living Trust asked shareholders to evaluate how the company proxy votes on matters of executive compensation, citing a trend of executive pay growing faster than the average worker’s.

The board recommended a vote against the proposal.

“We do not believe that additional reporting on the approach to compensation policies is warranted or would add value to our stockholders’ understanding of the Price Adviser’s approach to compensation,” the company wrote in this year’s proxy statement.

Both resolutions failed.

The shareholders also voted on, and rejected, a proposal by the Unitarian Universalist Church of Marblehead to prepare a diversity report.

The board did not make a recommendation on the proposal, noting that the company had recently released a diversity report as part of a five-year plan to create an inclusive culture at the company.

Shareholders approved the re-election of the company’s 13-member board of directors, executive compensation and KPMG’s reappointment as independent accountant.

During the question-and-answer portion of the meeting, one shareholder asked about the company’s falling share price and suggested that the company focus on more passive funds and lowering fees.

CEO William Stromberg said the company has been strategically lowering fees where executives feel it would be competitive.

However, it can be difficult to lower fees when competing with not-for-profit companies, like Vanguard, which has taken much of the passive market, said Edward Bernard, the vice chairman of the board.

“Competing with a not-for-profit company, where the only differentiator is price, is a pretty tough thing to do,” he said.

Executives also acknowledged the growing difference between passive and active investments as a “headwind” facing the company.

Passive investments are typically less managed, such as funds indexed to the Dow Jones or S&P 500. Active investing typically involves portfolio managers who buy and sell stocks with market fluctuations.

During his presentation, Stromberg said T. Rowe focuses on the active market with the passive market accounting for 5 percent of funds.

In 2016 net flows to passive funds accounted for $620 billion of the worldwide market, with $36 billion to active funds. In 2012, passive funds accounted for $369 billion net flows while active funds accounted for $532 billion.

“Active managers tend to do well when the environment is a little bit choppier,” said Brian Rogers, the board’s chair. “The market’s been straight up.”

The company will be spending more on advertising to promote active investments, Stromberg said.

“It is a period where there is less respect for active management, and in the coming months you will see us be more active and vocal in defense of active management,” he said.

One shareholder drove up from Annapolis just to praise the company for being among the first companies to pull advertisements from Bill O’Reilly’s Fox News show. O’Reilly was forced out of the company last week after the disclosure of multiple allegations of sexual harassment against him.

Stromberg credited the team managing the account, noting they did not ask upper management for permission.

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