The rules of engagement between issuers and institutional investors are rapidly evolving. Familiarizing oneself with the engagement philosophies of major investors has become an important ingredient to effective board communication with shareholders. In this episode, we take a look at one investor with a particularly interesting organizational structure–one that empowers the portfolio manager and takes an integrated approach to investment and proxy-voting decisions.
In this episode, regular guest host Doug Chia, Executive Director of The Conference Board Governance Center, sits down with William Ultan, Managing Director of Corporate Governance for Morrow Sodali, to dissect various aspects of T. Rowe Price’s Investment Philosophy on Shareholder Activism. As Chia explains, the T. Rowe Price philosophy addresses the criticism that many asset managers are siloed with little collaboration between investment and proxy-voting decision makers.
For directors, I think it’s extremely important to appreciate that not all institutional investors are the same, whether you’re talking about passive or active. For most institutions, you have parallel paths from a communication standpoint: you have the investment-personnel path (portfolio managers & analysts) and then you have the governance path. But for some, and perhaps for an increasing number of institutions, those paths do intersect, and T. Rowe is a good example of that.
“I would far rather have the dynamic where portfolio managers are making thoughtful decisions–perhaps in disagreement with one another, but nevertheless thoughtful–rather than [those decisions] being policy-driven on some indoctrinated point-of-view,” explained Ultan. “For corporate issuers, the challenge is to understand that dynamic and to develop strategies around it. So that when you choose to reach out to an institutional investor like T. Rowe Price, there’s not just one point of contact necessarily.”
In this episode, Chia and Ultan also discuss T. Rowe Price’s unique approach to activist campaigns, where the investors insist on meeting with both sides before making a voting decision in a formal proxy contest.