T. Rowe Price portfolio manager authors book

T. Rowe Price investment professional David Giroux has authored a book, “Capital Allocation:  Principles, Strategies, and Processes for Creating Long-Term Shareholder Value,” published Monday by McGraw Hill.

In “Capital Allocation,” Giroux, a portfolio manager in the U.S. Equity Division of T. Rowe Price,  shares his experiences from a 23-year career as an investment analyst and portfolio manager.  According to Giroux, capital allocation – the process by which company management teams and boards of directors deploy their firm’s financial resources both internally and externally – is one of a company’s most significant responsibilities.  But the historical record indicates that the average company does not perform this strategic task effectively and that its importance is often overlooked and underappreciated, even by companies themselves.

Through numerous case studies drawn from his personal interactions with some of the world’s most well-known companies as well as less familiar companies and through select academic research, Giroux gives readers a real-world glimpse behind the curtain about how capital allocation decisions are made – or not made – in company board rooms.

For firms that allocate capital well, strategic decisions about activities such as capital spending, dividends, share repurchases, and acquisitions provide a meaningful competitive advantage that can lead to strong business operations, solid financial results and attractive stock market performance.  For firms that don’t allocate capital well, it can mean underperformance in the marketplace, becoming a target for shareholder activism or even company failure.

Giroux writes that sound capital allocation decisions are especially critical in today’s economic environment.  Many firms now have more excess free cash flow than ever to deploy, even after investing to support and grow their businesses, as a result of several current trends.  Among them: slower global economic growth, lean manufacturing, and structurally low interest rates.

Despite this reality, capital allocation is a topic that has largely been ignored, according to Giroux.  Given its impact on the creation of shareholder value – the fundamental reason that most people invest in stocks – capital allocation warrants more time and attention than it receives, he avers.  The ideas and strategies addressed in the book, he adds, can empower firms over the long run by minimizing short-term pressures, creating appropriate incentives and building motivated and engaged staffs.

Proceeds from the sales of “Capital Allocation” will be donated to charity, including the T. Rowe Price Foundation, which is committed to supporting long-term community impact in youth empowerment, creativity, and innovation, and advancing comprehensive approaches to hunger, poverty and homelessness alleviation in Baltimore and worldwide.