Don’t Waste Time on Shareholder Proposals

There’s a better way for investors to get what they want, argues T. Rowe Price.

Billy H.C. Kwok/Bloomberg

Billy H.C. Kwok/Bloomberg

Voting on shareholder proposals is a poor way to drive change at portfolio companies, according to T. Rowe Price.

The $1 trillion asset manager said in a report Monday that investors are increasingly interested in shareholder proposals, but these votes matter less than some may think. “Shareholder proposals are non-binding votes that are nearly always opposed by the company’s management and typically find little support.” Nevertheless, “We see keen interest in our approach to voting on such resolutions, given mounting investor concern in this area,” the report said.

Engaging one-on-one with a portfolio company is far more valuable — and effective — when it comes to pushing for change, in T. Rowe Price’s experience.

Shareholder proposals are common in the United States, Japan, and certain Nordic regions because filing requirements are minimal. Individual or small investors can use them to try to exert power at a much larger company. Dutch asset manager Robeco has said that for large asset managers, shareholder proposals were a “missed opportunity” when it comes to ESG.

But for T. Rowe Price, shareholder proposals make up a small portion of the proxy voting activity the company engages in. Those focused specifically on environmental and social measures represent one-half of one percent of all proposals the firm votes on.

In 2019, the firm voted against 57 percent of all shareholder proposals, its report shows. But when it came to environmental and social-focused shareholder proposals, T. Rowe Price voted against 82 percent of them. Most of the environmental and social proposals related to disclosure. The firm said it believes that with these measures, “alternative or more practical opportunities” could yield the same results.

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Take, for example, an Amazon shareholder proposal made ahead of last year’s annual meeting. The initiative asked the company to better disclose information on sustainability. “It is true that at this time last year, their sustainability disclosures were a little piecemeal and weren’t exactly market-leading,” T. Rowe Price’s head of corporate governance Donna Anderson said by phone Monday.

But, she added, T. Rowe Price decided to engage with the company one-on-one. Amazon committed to fuller disclosures, which meant that T. Rowe Price didn’t end up voting for the shareholder proposal.

“In a situation like that, you ask yourself, what do we really get from supporting the proposal?” Anderson said. “Is there anything that you’ll get?”

In the end, those shareholders got what they wanted: Amazon’s sustainability disclosures in 2019 were up to snuff, according to Anderson. “When they did come out with their report, it was well above their expectations,” shesaid. “So, we got to the right outcome. I don’t think the shareholder proposal had much to do with it.”

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