DEF 14A 1 tm216522d3_def14a.htm DEF 14A

Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A
(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

 

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¨    Soliciting Material Pursuant to §240.14a-12

 

T. Rowe Price Group, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

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Table of Contents

 

 

T. Rowe Price Group, Inc.

 

A premier global active asset manager

 

         
Founded in
1937
$1.47
TRILLION

in assets under
management (¹)
724
investment
professionals
worldwide
Local presence in
16
COUNTRIES
7,678
associates
worldwide
         

 

Independent Investment Organization

 

Focused solely on investment management and related services  

 

Alignment of Interests

 

Publicly owned company with substantial employee ownership

 

Stable Investment Leadership

 

Global equity and fixed income leaders average 22 years’ tenure at T. Rowe Price

         

Financial Strength

 

No outstanding debt and maintains substantial cash reserves

 

Global Investment Platform

 

Full range of equity, fixed income, and multi-asset solutions

   

 

 

 

Our multiyear strategic objectives

 

  More global and diversified asset manager   Strong process orientation and effective internal controls, while becoming a more adaptive and agile company
       
  Global partner for retirement investors and provider of integrated investment solutions   Destination of choice for top talent with diverse workforce and inclusive culture
       
  Embedding best practices for sustainability and ESG throughout the company   Strong financial results and balance sheet

 

Past performance cannot guarantee future results. As of December 31, 2020.

 

(1)       Firmwide AUM includes assets managed by T. Rowe Price Associates, Inc., and its investment advisory affiliates.

 

2020 Performance

 

Investment Results

 

As investors, we remained focused on our strategic investing approach and delivering alpha for clients through active management. In 2020 our investment teams performed well across most asset classes, with 72%, 69%, and 77% of our U.S. mutual funds (primary share class only) outperforming their comparable Morningstar median over the 3-, 5-, and 10-year periods ended December 31, 2020.(1)

 

Financial Results

 

Our assets under management (AUM) grew by 22% to $1.47 trillion on December 31, 2020, with about 9.3% of our AUM domiciled outside the U.S. Average AUM grew 12.5% to $1.25 trillion, which led to revenues of more than $6.2 billion, up 10.5% or $590 million versus 2019. Operating expenses on a GAAP basis increased 7.1% to $3.5 billion. Diluted earnings per share grew 14.7% to $9.98 per share and adjusted diluted earnings per share grew 18.7% to $9.58 per share.

 

 

 

Responsibility Snapshot

 

Sustainable Investing on Behalf of Clients

 

Environmental, social, and governance (ESG) factors are key considerations in our investment approach—our investment teams focus on understanding the long-term sustainability of the companies in which we invest. ESG considerations are analyzed by two teams: Responsible Investing, which covers environmental and social factors, and Governance. Together, they help our investors make more informed decisions.

 

Reducing Our Environmental Footprint

 

We are committed to tackling the challenge of climate change in a way that balances business needs with the urgency for action. This means managing our environmental footprint, as well as incorporating climate considerations into our investment analysis—for the purpose of safeguarding our clients’ investments. Our original plan was to reduce greenhouse gas (GHG) emissions by 13% by 2025 and landfill waste by 92%. Since 2010, our benchmark year, we have reduced greenhouse gas emissions by 14.1%, even as our associate population rose by 70.6%. We have also reduced landfill waste by 93%. With a significant percentage of our workforce presently working from home and an uncertain timeframe to return to the office, the COVID-19 pandemic has constrained our ability to revisit our emission and waste reduction targets. Moreover, we have undertaken a firmwide assessment of future flexibility and remote work. The outcomes of these initiatives will also influence our emissions reduction trajectory. We will evaluate these questions and communicate our new targets.

 

Promoting Diversity

 

Our long-held reputation for excellence and reliability is made possible by the diversity of backgrounds, perspectives, skills, and experiences of our associates.

 

To bring diversity & inclusion to life, we:

 

  Retain & attract diverse talent   Include and engage our associates   Develop our associates and leaders   Hold ourselves accountable   Act as an agent of change

  

In 2020      
       
60% 49% 44% 29%
of our independent Board members were ethnically diverse or women of senior-level hires were ethnically diverse or women(2) of our associates in our global workforce were women of our U.S. associates were ethnically diverse

 

(1)Source: © 2020 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Primary share class only.

(2)Senior roles are defined as people leaders and/or individual contributors with significant business or functional responsibility.

 

   

 

Notice of 2021 Annual Meeting of Stockholders

 

 

Date and Time

Tuesday May 11, 2021, 8 a.m. Eastern Time

 

Record Date

March 11, 2021. Only stockholders of record at the close of business on the record date are entitled to receive notice of, and to vote at, the Annual Meeting

 

Virtual Meeting

This year’s Annual Meeting will be held virtually through www.virtualshareholdermeeting.com/ TROW2021

 

Voting Methods

 

 
  Internet
   
  Telephone
   
  Mail
   
  In Person
 

YOUR VOTE IS IMPORTANT!

 

Please execute and return the enclosed proxy promptly whether or not you plan to attend the T. Rowe Price Group, Inc., 2021 Annual Meeting of Stockholders.

 

T. ROWE PRICE GROUP, INC. 100 EAST PRATT STREET BALTIMORE, MD 21202

 

 

 

VOTING ITEM   BOARD VOTING
RECOMMENDATION
1 Elect a Board of 11 directors   FOR
      All Director-Nominees
2 Approve, by a non binding advisory vote, the compensation paid by the Company to its named executive officers   FOR
3 Ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2021   FOR
4 Consider a stockholder proposal requesting the preparation of a report on voting by our funds and portfolios on matters related to climate change, if properly presented at the Annual Meeting   AGAINST

  

Stockholders who owned shares of our common stock as of March 11, 2021, are entitled to attend and vote at the Annual Meeting or any adjournments.

 

By Order of the Board of Directors,

 

 

David Oestreicher

General Counsel and Corporate Secretary 

Baltimore, Maryland 

March 24, 2021

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 11, 2021
 

This proxy statement and our 2020 Annual Report to Stockholders may be viewed, downloaded, and printed, at no charge, by accessing the following internet address: materials.proxyvote.com/74144T.

 

Stockholders who wish to attend the Annual Meeting must follow the instructions on page 71 under the section titled “What must I do to participate in the Annual Meeting?”



2021 Proxy Statement 1

 

Introduction

 

This proxy statement is being made available to you in connection with the solicitation of proxies by the T. Rowe Price Group, Inc. (Price Group or the Company) Board of Directors (Board) for the 2021 Annual Meeting of Stockholders (Annual Meeting). The purpose of the Annual Meeting is to:

 

Elect a Board of 11 directors;

 

Approve, by a non binding advisory vote, the compensation paid by the Company to its named executive officers;

 

Ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2021; and

 

Consider a stockholder proposal requesting the preparation of a report on voting by our funds and portfolios on matters related to climate change, if properly presented at the Annual Meeting.

 

This proxy statement, the proxy card, and our 2020 Annual Report to Stockholders containing our consolidated financial statements and other financial information for the year ended December 31, 2020, form your “Proxy Materials.” We have adopted the Securities and Exchange Commission’s (SEC) “Notice and Access” model of proxy notification, which allows us to furnish proxy materials online, with paper copies available upon request. We sent you a notice on how to obtain your Proxy Materials on March 24, 2021.

 

2T. Rowe Price Group

 

 

Voting Roadmap

 

Proposal 1

 

Election of Directors

 

Board Demographics        
INDEPENDENCE   DIVERSITY   TENURE
         

  10 of 11 members of the Board are independent under the NASDAQ Global Select Market standards

 

   All directors serving on the Audit, Executive Compensation and Management Development and Nominating and Corporate Governance Committees are independent

 

   A well-empowered lead independent director provides independent leadership to our Board

 

 

Of our independent directors:

 

 

•    Balanced mix of short- and long-tenured directors

 

•    The tenure of our independent directors ranges from 18 months to 11 years, with an average tenure of approximately six years

 

   Longer-tenured directors in leadership roles

 

QUALIFICATIONS, SKILLS, AND EXPERIENCE   BOARD ENGAGEMENT
     
100%
Executive Leadership
82%
Financial Management
45%
Investment Management
 

   The Board held ten (10) meetings in 2020

 

   Each director attended at least 75% of the combined total number of meetings of the Board and Board committees of which he or she was a member

 

   The independent directors met in executive session at five of the Board meetings in 2020

 

   All directors were at the 2020 annual meeting of stockholders virtually and were available to respond to questions from our stockholders

 

             
73%
International
36%
Accounting and Financial Reporting
100%
Strategy and Execution
 
             
55%
Marketing and Distribution
73%
Government and Regulatory
36%
Technology
 

 

FOR Recommendation of the Board of Directors  Vote Required 
We recommend that you vote FOR all the director nominees under Proposal 1.  

 

 

2021 Proxy Statement 3


 

 

Proposal 2

 

Advisory Vote on the Compensation Paid to Our Named Executive Officers

 

Our named executive officers’ (NEOs) compensation is straight-forward, goal-oriented, long-term focused, transparent, and aligned with the interests of our stockholders.

 

Our incentive compensation programs are designed to motivate and reward performance, as measured by a number of factors, including:

 

the financial performance and financial stability of Price Group
the relative investment performance of our mutual funds and other investment portfolios
the performance of our NEOs against the corporate and individual goals established at the beginning of the year

 

Our executive compensation programs are also designed to reward our NEOs for other important contributions to our success, including corporate integrity, service quality, customer loyalty, risk management, corporate reputation, and the quality of our team of professionals and collaboration within that team.

 

Our equity awards create a strong alignment of the financial interests of our NEOs directly to the long-term performance of our Company, as measured by our stock price.

 

    CEO
COMPENSATION
  OTHER NEOs
COMPENSATION
(EXCLUDING
FORMER CFO)
  FORM OF
COMPENSATION
  PERFORMANCE PERIOD   PERFORMANCE ALIGNMENT
      Cash   Ongoing      Individual
      Cash   Annual  

   Maximum bonus pool cannot exceed 5% of net operating income (adjusted)

 

   Actual NEO bonus amounts based on Company performance against financial and strategic goals, as well as individual performance

      Performance Stock Units   Three-year performance period then vest 50% per year over two following years  

   Company operating margin performance compared with peers

 

   Company stock price

      Restricted Stock Units   Vest one-third per year over three years      Company stock price

 

FOR Recommendation of the Board of Directors  Vote Required 
We recommend that you vote FOR this proposal.  

 

4 T. Rowe Price Group


 

 

Proposal 3

 

Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2021

 

The Audit Committee and the Board believe that the continued retention of KPMG as our independent registered public accounting firm is in the best interest of Price Group and our stockholders.

 

FOR Recommendation of the Board of Directors  Vote Required 
We recommend that you vote FOR this proposal.  

 

 

Proposal 4

 

Stockholder Proposal Requesting the Preparation of a Report on Voting by Our Funds and Portfolios on Matters Related to Climate Change

 

AGAINST Recommendation of the Board of Directors   Vote Required 
We recommend that you vote AGAINST this proposal.  

 

2021 Proxy Statement 5


 

Table of Contents

 

Notice of 2021 Annual Meeting of Stockholders 1
   
Introduction 2
   
Voting Roadmap 3
   
Board of Directors 7
   
Board Qualifications, Skills and Experience 7
   
Nominee Biographies 9
   
Director Engagement 14
   
Committees of the Board 15
   
Governance Policies and Procedures 18
   
Non-Employee Director Independence Determinations 18
   
   

 Proposal 1 

Election of Directors

19
   
Corporate Governance 20
   
Report of the Nominating and Corporate Governance Committee 20
   
Governance Highlights 20
   
Board Composition 22
   
Engagement with our Stockholders 25
   
Compensation of Directors 27
   
Human Capital 31
   
Executive Compensation 33
   
Compensation Discussion & Analysis 33
   
Report of the Executive Compensation and Management Development Committee 51
   
Executive Compensation Tables 52
   
Summary Compensation Table 52
   
2020 Grants of Plan-Based Awards Table 53
   
Outstanding Equity Awards Table at December 31, 2020 54
   
2020 Options Exercises and Stock Vested Table 56

2020 Nonqualified Deferred Compensation Table 57
   
Potential Payments on Termination or Change in Control 58
   
Chief Executive Officer Pay Ratio 58
   

 Proposal 2 

Advisory Vote on the Compensation Paid to Our Named Executive Officers

59
   
Audit Matters 60
   
Disclosure of Fees Charged by the Independent Registered Public Accounting Firm 60
   
Audit Committee Preapproval Policies 60
   
Report of the Audit Committee 61
   

 Proposal 3 

Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2021

62
   

 Proposal 4 

Stockholder Proposal For a Report on Voting by Our Funds and Portfolios on Matters Relating to Climate Change

63
   
Stock Ownership and Related Transactions 66
   
Equity Compensation Plan Information 66
   
Security Ownership of Certain Beneficial Owners and Management 66
   
Section 16(a) Beneficial Ownership Reporting Compliance 68
   
Certain Relationships and Related Transactions 68
   
Questions and Answers About the Proxy Materials and the Annual Meeting 69
   
Stockholder Proposals for the 2022 Annual Meeting  


6T. Rowe Price Group

 

Board of Directors

 

Board Qualifications, Skills and Experience

 

We believe that the nominees presented in this proxy statement constitute a Board with an appropriate level and diversity of experience, education, skills, and independence. We routinely assess and monitor the capabilities of our existing directors and whether additional capabilities and independent directors should be added to the Board. In considering the need for additional independent directors, we consider any expected Board departures and retirements and factor succession planning for Board members into our deliberations, with particular reference to specific skills and capabilities of departing Board members. We are very pleased with our current complement of directors and the varied perspectives they bring to the Board.

 

The following are highlights on the composition of our current Board:

 

10 of 11 members of the Board are independent under the NASDAQ Global Select Market standards

 

Four directors are women, representing 40% of the independent directors on the Board

 

Three directors were born outside of the United States, representing 30% of the independent directors on the Board

 

Four directors are ethnically diverse, representing 40% of the independent directors on the Board

 

Three directors are veterans, representing 30% of the independent directors on the Board

 

40% of the independent directors joined the Board within the last five years; the average non-executive director tenure is six years

 

 

INDEPENDENT DIRECTOR COMPOSITION

 

   

 

DIRECTOR TENURE   DIRECTOR INDEPENDENCE
     
     

2021 Proxy Statement          7

 

The chart below summarizes the specific qualifications, attributes, and skills for each director. An “” in the chart below indicates that the director has meaningfully useful expertise in that subject area. The lack of an “” does not mean the director does not possess knowledge or skill. Rather, an “” indicates a specific area of focus or expertise of a director on which the board currently relies.

 

  Executive
Leadership 
Financial
Management 
Investment
Management
Industry 
International
Business
Experience 
Technology/
Cyber 
Strategy
Formation/
Execution 
Marketing/
Distribution 
Government/
Regulatory 
Diversity 
                   
Name
William J. Stromberg    
Mark S. Bartlett          
Mary K. Bush    
Dina Dublon  

Dr. Freeman A. Hrabowski, III

     
Robert F. MacLellan    
Olympia J. Snowe          
Robert J. Stevens    
Richard R. Verma        
Sandra S. Wijnberg
Alan D. Wilson        

 

8            T. Rowe Price Group

 

Nominee Biographies

 

Each of our directors provides significant individual attributes important to the overall makeup and functioning of our Board, which are described in the biographical summaries provided below:

 

Mark S. Bartlett, 70

 

Retired Managing Partner
Ernst & Young

 

Independent Director since: 2013

 

Committee Memberships:

 

    Audit (Chair)  

    Executive Compensation and Management Development

Mr. Bartlett has been an independent director of Price Group since 2013 and serves as chair of the Audit Committee and as a member of the Executive Compensation and Management Development Committee. He was a partner at Ernst & Young, serving as managing partner of the firm’s Baltimore office and senior client service partner for the mid-Atlantic region. Mr. Bartlett began his career at Ernst & Young in 1972 and has extensive experience in financial services, as well as other industries.

 

Mr. Bartlett received his B.S. from West Virginia University and attended the Executive Program at the Kellogg School of Business at Northwestern University. He also earned the designation of certified public accountant.

 

Mr. Bartlett is a member of the board of directors, chair of the audit committee and a member of the compensation committee of WillScot Mobile Mini Holdings Corp. He also serves as a member of the board of directors and a member of the audit committees of FTI Consulting, Inc., and Rexnord Corporation.

 

Mr. Bartlett offers our Board significant accounting and financial reporting experience as well as expertise in the accounting-related rules and regulations of the SEC from his experience as a partner of a multinational audit firm. He has extensive finance knowledge, with a broad range of experience in financing alternatives, including the sale of securities, debt offerings, and syndications.

 

 

Mary K. Bush, 72

 

Chairman
Bush International, LLC

 

Independent Director since: 2012

 

Committee Memberships:

 

    Executive Compensation and Management Development 

    Nominating and Corporate Governance 

Ms. Bush has been an independent director of Price Group since 2012 and serves as a member of the Executive Compensation and Management Development Committee and the Nominating and Corporate Governance Committee. She serves as the chairman of Bush International, LLC, an advisor to U.S. corporations and foreign governments on international capital markets and strategic business and economic matters, since 1991. Earlier in her career, she managed global banking and corporate finance relationships at New York money center banks including Citibank, Banker’s Trust, and Chase.

 

Ms. Bush holds an M.B.A. from the University of Chicago and a B.A. in economics and political science from Fisk University.

 

Ms. Bush is a member of the board of directors and the risk oversight committee, and the chair of the nominating and corporate governance committee of Discover Financial Services, and a member of the board of directors, audit and compensation committees, and chair of the retirement plan committee of ManTech International Corporation. She is also a member of the board of directors and chair of the audit committee for Bloom Energy. Ms. Bush also was a director of the Pioneer Family of Mutual Funds from 1997 to 2012, UAL Corporation from 2006 to 2010 and Marriott International, Inc. from 2008 to 2020.

 

Ms. Bush brings to our Board extensive financial, international and governmental affairs experience, her knowledge of corporate governance and financial oversight gained from her membership on the boards of other public companies, knowledge of public policy matters, and her significant experience providing strategic advisory services in the financial and international arenas.

 

 

2021 Proxy Statement         9

 

 

Dina Dublon, 67

 

Retired Executive Vice President and Chief Financial Officer
JPMorgan Chase & Co.

 

Independent Director since: 2019

 

Committee Memberships:

 

    Audit 

    Executive Compensation and Management Development 

Ms. Dublon has been an independent director of Price Group since 2019 and serves as a member of the Audit Committee and the Executive Compensation and Management Development Committee. She was the executive vice president and chief financial officer of JPMorgan Chase & Co. from 1998 until her retirement in 2004. Ms. Dublon previously held numerous positions at JPMorgan Chase & Co. and its predecessor companies, including corporate treasurer, managing director of the financial institutions division and head of asset liability management.

 

Ms. Dublon received her B.A. in economics and mathematics from Hebrew University of Jerusalem and her M.S. from Carnegie Mellon University.

 

Ms. Dublon has served as a director of PepsiCo, Inc. since 2005, where she serves as the chair of the public policy and sustainability committee and a member of the compensation committee. She previously served as chair of the audit committee. She serves as a member of the Independent Audit Quality Committee of EY USA and on the board of directors of Motive Capital Corp. She also serves on the board of advisors of Columbia University’s Mailman School of Public Health since 2018. From 2002 to 2017, Ms. Dublon served as a director of Accenture PLC; from 2013 to 2018 as a director of Deutsche Bank AG; from 2005 to 2014 as a director of Microsoft Corporation; and from 1999 to 2002 as a director of Hartford Financial Services Group, Inc. She previously served on the faculty of Harvard Business School and on the boards of several non-profit organizations, including the Women’s Refugee Commission and Global Fund for Women.

 

Ms. Dublon brings to our Board significant accounting and financial reporting experience as well as substantial expertise with respect to the financials sector, mergers and acquisitions, global markets, public policy, and corporate finance gained throughout her career in the financial services industry, particularly her role as executive vice president and chief financial officer of a major financial institution.

 

 

Dr. Freeman A. Hrabowski, III, 70

 

President
University of Maryland, Baltimore County

 

Independent Director since: 2013

 

Committee Memberships:

 

    Executive Compensation and Management Development 

    Nominating and Corporate Governance 

Dr. Hrabowski has been an independent director of Price Group since January 2013 and serves on the Executive Compensation and Management Development Committee and the Nominating and Corporate Governance Committee. He has served as the president of the University of Maryland, Baltimore County (UMBC), since 1992. His research and publications focus on science and math education, with special emphasis on minority participation and performance. Dr. Hrabowski is also a leading advocate for greater diversity in higher education. He serves as a consultant to the National Science Foundation, the National Institutes of Health, the National Academies, and universities and school systems nationally.

 

Dr. Hrabowski earned a Ph.D. in higher education administration and statistics and an M.A. in mathematics from the University of Illinois at Urbana-Champaign. He also holds a B.A. in mathematics from Hampton University.

 

Dr. Hrabowski is a member of the board of directors and a member of the corporate and governance committee of McCormick & Company, Inc. He also served on the board of Constellation Energy Group, Inc., until 2012.

 

Dr. Hrabowski brings to our Board valuable strategic and management leadership experience from his role as president of a public university, as well as his extensive knowledge and dedication to greater education and workforce development. He also contributes corporate governance oversight from his experience serving as a director on other public company boards.
 
 
 
   

10        T. Rowe Price Group 

 

Robert F. MacLellan, 66

 

Nonexecutive Chairman
Northleaf Capital Partners

 

Independent Director since: 2010

 

Committee Memberships:

 

    Audit 

    Executive 

    Executive Compensation and Management Development (Chair) 

Mr. MacLellan has been an independent director of Price Group since 2010 and serves as chair of the Executive Compensation and Management Development Committee and as a member of the Audit and Executive Committees. He is the nonexecutive chairman of Northleaf Capital Partners, an independent global private markets fund manager and advisor. From 2003 to November 2009, Mr. MacLellan served as chief investment officer of TD Bank Financial Group (TDBFG), where he was responsible for overseeing the management of investments for its Employee Pension Fund, The Toronto-Dominion Bank, TD Mutual Funds, and TD Capital Group. Earlier in his career, Mr. MacLellan was managing director of Lancaster Financial Holdings, a merchant banking group acquired by TDBFG in March 1995. Prior to that, he was vice president and director at McLeod Young Weir Limited (Scotia McLeod) and a member of the corporate finance department responsible for a large number of corporate underwritings and financial advisory assignments.

 

Mr. MacLellan holds a B.Comm. from Carleton University and an M.B.A. from Harvard University, and is a chartered accountant.

 

Mr. MacLellan is a member of the board of directors and chair of the audit committee of Magna International, Inc., a public company based in Aurora, Ontario. From 2012 to 2018, he was the chair of the board of Yellow Media, Inc., a public company based in Montreal.

 

Mr. MacLellan brings substantial experience and perspective to our Board with respect to the financial services industry, particularly his expertise with respect to investment-related matters, including those relating to the mutual fund industry and the institutional management of investment funds, based on his tenure as chief investment officer of a major financial institution. He also brings an international perspective to the Board as well as significant accounting and financial reporting experience.

 

Olympia J. Snowe, 74

 

Chair and Chief Executive Officer
Olympia Snowe, LLC

 

Independent Director since: 2013

 

Committee Memberships:

 

    Executive Compensation and Management Development 

    Nominating and Corporate Governance (Chair)

Ms. Snowe has been an independent director of Price Group since June 2013 and serves as chair of the Nominating and Corporate Governance Committee and as a member of the Executive Compensation and Management Development Committee. She is chairman and chief executive officer of Olympia Snowe, LLC, a policy and communications consulting firm, and a member of the board of directors and senior fellow at the Bipartisan Policy Center. Ms. Snowe served in the U.S. Senate for the state of Maine from 1995 to 2013 and as a member of the U.S. House of Representatives from 1979 to 1995. While in the U.S. Senate, she served as chair and was the ranking member of the Senate Committee on Small Business and Entrepreneurship and served on the Senate Finance Committee. She also served as chair of the Subcommittee on Seapower for the Senate Armed Services Committee and chair and ranking member of the Ocean and Fisheries Subcommittee.

 

Ms. Snowe earned a B.S. from the University of Maine and has received honorary degrees from many colleges and universities.

 

Ms. Snowe is a member of the board of directors of Synchrony Financial and serves as chair of the nominating and corporate governance committee and a member of its audit committee, as well as a director on the board of Synchrony Bank and a member of its audit committee. Ms. Snowe previously served on the board of directors of Aetna Inc., a diversified health care benefits company, where she was a member of the audit committee and the medical affairs committee from 2014 to 2018.

 

Ms. Snowe brings a broad range of valuable leadership and public policy experience to our Board. She also has extensive experience with complex issues relevant to the Company’s business, including budget and fiscal responsibility, economic, tax and regulatory policy, education, retirement and aging, women’s issues, health care, foreign affairs, and national security.

 

2021 Proxy Statement            11

 

Robert J. Stevens, 69

 

Retired Chairman, President and Chief Executive Officer
Lockheed Martin Corporation

 

Independent Director since: 2019

 

Committee Memberships:

 

     Executive Compensation and Management Development 

•     Nominating and Corporate Governance 

 

Mr. Stevens has been an independent director of Price Group since 2019 and serves as a member of the Executive Compensation and Management Development Committee and the Nominating and Corporate Governance Committee. Mr. Stevens is the former chairman, president, and chief executive officer of Lockheed Martin Corporation. He was elected chairman in April 2005 and served as executive chairman from January through December 2013. He also served as Lockheed Martin’s chief executive officer from August 2004 through December 2012. Previously, he held a variety of increasingly responsible executive positions with Lockheed Martin, including president and chief operating officer, chief financial officer, and head of strategic planning.

 

Mr. Stevens received his B.A. from Slippery Rock University of Pennsylvania, his M.S. in industrial engineering and management from the New York University Tandon School of Engineering, and his M.S. in business from Columbia University.

 

Mr. Stevens is an emeritus director of the boards of directors of the Congressional Medal of Honor Foundation, the Marine Corps Scholarship Foundation, and the Atlantic Council, and is a member of the Council on Foreign Relations. From 2002 to 2018, he was the lead independent director of Monsanto Corporation, where he also served as the chair of the nominating and corporate governance committee and a member of the audit committee. Mr. Stevens served as a director of United States Steel Corporation from 2015 to 2018, where he was on the corporate governance and public policy committee and the compensation and organization committee.

 

Mr. Stevens brings to our Board significant executive management experience. He also adds additional perspective to our Board regarding financial matters, mergers and acquisitions, strategic leadership, and international operational experience based on his tenure as chief executive officer of a publicly traded, multinational corporation.

 

  

William J. Stromberg, 61

 

Chair and Chief Executive Officer
T. Rowe Price Group, Inc.

 

Director since: 2016

 

Committee Memberships:

 

     Executive (Chair)  

     Management (Chair) 

 

Mr. Stromberg is the Chief Executive Officer (CEO) of Price Group and is the Chair of the Board. He is the chair of the Company’s Executive, Management, and Management Compensation and Development Committees. Mr. Stromberg served as the head of Equity from 2009 to 2015 and the head of U.S. Equity from 2006 to 2009. He also served as a director of Equity Research (1996 to 2006), as a portfolio manager of the Capital Opportunity Fund (2000 to 2007) and the Dividend Growth Fund (1992 to 2000), and as an equity investment analyst (1987 to 1992). Prior to joining the firm in 1987, he was employed by Westinghouse Defense as a systems engineer.

 

Mr. Stromberg earned a B.A. from Johns Hopkins University and an M.B.A. from the Tuck School of Business at Dartmouth. Mr. Stromberg also has earned the Chartered Financial Analyst® designation.

 

He currently serves on the Johns Hopkins University board of trustees and the Hopkins Whiting School of Engineering advisory council. Mr. Stromberg previously served nine years on the Catholic Charities Board of Trustees, with two years as board president.

 

Mr. Stromberg brings to our Board insight into the critical investment component of our business based on the leadership roles he has held in the Equity Division of Price Group and his 30-year career with the Company.

 

 

12          T. Rowe Price Group 

 

 

Richard R. Verma, 52

 

Executive Vice President, Global Public Policy and Regulatory Affairs
Mastercard, Inc.

 

Independent Director since: 2018

 

Committee Memberships:

 

    Audit  

    Executive Compensation and Management Development 

 

Mr. Verma has been an independent director of Price Group since 2018 and serves as a member of the Audit Committee and the Executive Compensation and Management Development Committee. He is the executive vice president for global public policy and regulatory affairs at Mastercard Incorporated, an American multinational financial services corporation. Mr. Verma previously served as the vice chairman and a partner at The Asia Group, from 2017 to 2020. He served as United States Ambassador to India from 2014 to 2017. Mr. Verma was assistant secretary of state for legislative affairs from 2009 to 2011 and was senior national security advisor to the U.S. Senate majority leader from 2004 to 2007. He also was a partner and senior counselor with Steptoe & Johnson LLP, a global law firm, and is a U.S. Air Force veteran, who served as judge advocate during active duty.

 

Mr. Verma holds a B.S. in industrial engineering from Lehigh University, an L.L.M. in international law from Georgetown University Law Center, a J.D. from American University’s Washington College of Law, and a Ph.D. from Georgetown University.

 

Mr. Verma is Senior Fellow at Harvard University’s Belfer Center, serves as a trustee at Lehigh University, and is on the board of the National Endowment for Democracy.

 

Mr. Verma brings substantial experience and a global perspective to our Board with respect to public policy, business, foreign and legislative affairs, strategic leadership, and corporate social responsibility.

 

   

Sandra S. Wijnberg, 64

 

Former Partner and Chief Administrative Officer
Aquiline Holdings LLC

 

Independent Director since: 2016

 

Committee Memberships:

 

    Audit 

    Executive Compensation and Management Development

Ms. Wijnberg has been an independent director of Price Group since 2016 and serves as a member of the Audit Committee and the Executive Compensation and Management Development Committee. She was an executive advisor of Aquiline Holdings LLC, a private-equity investment firm specializing in the financial services sector from 2015 to 2019 and was a partner and chief administrative officer of Aquiline Holdings LLC, a registered investment advisor and the holding company for Aquiline Capital Partners from 2007 to 2014. Previously, Ms. Wijnberg served as the senior vice president and chief financial officer of Marsh & McLennan Companies, Inc., and was treasurer and interim chief financial officer of YUM! Brands, Inc. Prior to that she held financial positions with PepsiCo, Inc., and worked in investment banking at Morgan Stanley. In addition, from 2014 through 2015, Ms. Wijnberg was deputy head of mission for the Office of the Quartet, a development project under the auspices of the United Nations.

 

Ms. Wijnberg holds a B.A. in English literature from the University of California, Los Angeles, and an M.B.A. from University of Southern California’s Marshall School of Business, for which she is a member of the board of leaders.

 

Ms. Wijnberg is a member of the board of directors, chair of the audit committee, and member of the nominating and corporate governance committee of Automatic Data Processing, Inc. She is a member of the board of directors, chair of the audit committee and a member of the finance committee of Cognizant Technology Solutions Corp. From 2003 to 2016, Ms. Wijnberg served on the board of directors of Tyco International, PLC, and from 2007 to 2009 served on the board of directors of TE Connectivity, Inc. She is a director and the chair of the Audit Committee of Hippo Enterprises Inc., a private company. She is also a director of Seeds of Peace and is a trustee of the John Simon Guggenheim Memorial Foundation.

 

Ms. Wijnberg brings to our Board a global perspective along with substantial financials sector, corporate finance, and management experience based on her roles at Aquiline Capital Partners, Marsh & McLennan, and YUM! Brands, Inc.

 

2021 Proxy Statement          13

 

Alan D. Wilson, 63

 

Retired Executive Chairman
McCormick & Company, Inc.

 

Independent Director since: 2015

 

Committee Memberships:

 

     Executive  

     Executive Compensation and Management Development 

•     Nominating and Corporate Governance 

 

Mr. Wilson has been an independent director of Price Group since 2015 and serves as a member of the Executive Committee, the Executive Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee. He is also the lead independent director of the Board. Mr. Wilson was executive chair of McCormick & Company, Inc. a global leader in flavor, seasonings and spices, and held many executive management roles, including chairman, president, and chief executive officer from 2008 to 2016.

 

Mr. Wilson earned a B.S. in communications from the University of Tennessee. He attended school on a R.O.T.C. scholarship and, following college, served as a U.S. Army captain, with tours in the United States, United Kingdom, and Germany.

 

Mr. Wilson is a member of the board of directors of Westrock Company and is the chair of the nominating and corporate governance committee and a member of the finance committee. He also chairs the board of visitors of University of Maryland, Baltimore County and currently serves on the University of Tennessee’s board of trustees and the University of Tennessee’s business school advisory board.

 

Mr. Wilson brings to our Board significant executive management experience, having led a publicly traded, multinational company. He also adds additional perspective regarding matters relating to general management, strategic leadership, and financial matters.

 

   

 

Director Engagement

 

Meetings

 

During 2020, the Board held 10 meetings and approved one matter via unanimous written consent. Each director attended at least 75% of the combined total number of meetings of the Board and Board committees of which he or she was a member. Consistent with the Company’s Corporate Governance Guidelines, the independent directors met in executive session at each of the Board’s regular meetings in 2020. Our Corporate Governance Guidelines provide that all directors are expected to attend the annual meeting of stockholders. All nominees for director submitted to the stockholders for approval at last year’s annual meeting on May 12, 2020, attended that meeting, and we anticipate that all nominees will attend the Annual Meeting.

 

Beyond the Boardroom

 

Director Orientation and Continuing Education and Development

 

When a new independent director joins the Board, we provide an orientation program for the purpose of providing the new director with an understanding of the operations and the financial condition of the Company as well as the Board’s expectations for its directors. Each director is expected to maintain the necessary knowledge and information to perform his or her responsibilities as a director. To assist the directors in understanding the Company and its industry and maintaining the level of expertise required for the director, the Company will, from time to time and at least annually, offer Company-sponsored continuing education programs or presentations in addition to briefings during Board meetings relating to the competitive and industry environment and the Company’s goals and strategies. In addition, at most meetings the Board receives special education sessions on one or more topics related to key industry trends, topical business issues and governance.

 

The Board is a member of the National Association of Corporate Directors, which provides resources that help directors strengthen board leadership. Each director is encouraged to participate at least once every three years in continuing education programs for public company directors sponsored by nationally recognized educational organizations not affiliated with the Company. The cost of all such continuing education is paid for by the Company.

 

14         T. Rowe Price Group 

 

Committees of the Board of Directors

 

Our Board has an Audit Committee, an Executive Compensation and Management Development Committee (Compensation Committee), a Nominating and Corporate Governance Committee and an Executive Committee. The Board has also authorized a Management Committee that is made up entirely of senior officers of the Company.

 

Committee Charters

 

The Board has adopted a separate written charter for the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Current copies of each charter, our Corporate Governance Guidelines, and our Code of Ethics for Principal Executive and Senior Financial Officers can be found on our website, troweprice.com, by selecting “Investor Relations” and then “Governance.”

 

Audit Committee            
Meetings in 2020: 5   Chair   Members            
The report of the Committee
appears on page 61.
         
    Bartlett   Dublon   MacLellan   Verma   Wijnberg

 

Qualifications and Financial Expert Determination

 

The Board of Directors has determined that each of the Audit Committee members meet the independence and financial literacy criteria of the NASDAQ Global Select Market and the SEC. The Board also has concluded that Messrs. Bartlett and MacLellan and Mses. Dublon and Wijnberg meet the criteria for an audit committee financial expert as established by the SEC. Mr. Bartlett is a certified public accountant, was an audit partner at Ernst & Young for 28 years until he left the firm in 2012, and serves as the chair of the audit committee of WillScot Mobile Mini Holdings Corp. and as a member of the audit committees of FTI Consulting, Inc. and Rexnord Corporation. Ms. Dublon was the executive vice president and chief financial officer of JPMorgan Chase & Co., from 1998 to 2004. She served as member and chair of the audit committee of PepsiCo, Inc. Mr. MacLellan is a chartered accountant, and serves as chair of the audit committee of Magna International, Inc., and was a member of the audit committees for Ace Aviation Holdings, Inc., and Maple Leaf Sports and Entertainment, Ltd. Ms. Wijnberg was the chief financial officer of Marsh & McLennan Companies, Inc., from 2000 to 2006 and interim chief financial officer of YUM! Brands in 1999. She is currently the chair of the audit committees for Automatic Data Processing, Inc. and Cognizant Technology Solutions Corp, and she served as member and chair of the audit committees of Tyco International and TE Connectivity, respectively.

 

Responsibilities

 

The primary purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities with respect to:

 

The integrity of our financial statements and other financial information provided to our stockholders;

 

The retention of our independent registered public accounting firm, including oversight of the terms of its engagement and its performance, qualifications, and independence;

 

The performance of our internal audit function, internal controls, and disclosure controls; and

 

The Company’s risk management framework.

 

The Audit Committee:

 

Provides an avenue for communication among our internal auditors, financial management, chief risk officer, independent registered public accounting firm, and the Board; and

 

Is responsible for maintaining procedures involving the receipt, retention, and treatment of complaints or concerns regarding accounting, internal accounting controls, and auditing matters, including confidential, anonymous employee submissions.

 

The independent registered public accounting firm reports directly to the Audit Committee and is ultimately accountable to this committee and the Board for the audit of our consolidated financial statements.

 

2021 Proxy Statement 15

 

The head of the Company’s internal audit department reports directly to the Audit Committee.

 

The Audit Committee receives regular updates from our risk and technology departments concerning our information security program.

 

Related Person Transaction Oversight

 

The Audit Committee is responsible under its charter for reviewing related person transactions and any change in, or waiver to, our Code of Ethics for our Principal Executive and Senior Financial Officers. Our Board has adopted a written Policy for the Review and Approval of Transactions with Related Persons. Any transaction that would require disclosure under Item 404(a) of Regulation S-K will not be initiated or materially modified until our Audit Committee has approved such transaction or modification and will not continue past its next contractual termination date unless it is annually reapproved by our Audit Committee. During its deliberations, the Audit Committee must consider all relevant details regarding the transaction including, but not limited to, any role of our employees in arranging the transaction, the potential benefits to our Company, and whether the proposed transaction is competitively bid or otherwise is on terms comparable to those available to an unrelated third party or our employees generally. The Audit Committee approves only those transactions that it determines in good faith to be on terms that are fair to us and comparable to those that could be obtained in an arms-length negotiation with an unrelated third party. Please see the disclosure provided in the section entitled “Certain Relationships and Related Transactions” beginning on page 68.

 

Risk Management Oversight

 

The Audit Committee oversees and evaluates our policies with respect to significant risks and exposures faced by the Company and the steps taken to assess, monitor, and manage those risks. The Company’s Risk and Operational Steering Committee, comprised of senior members of management including our chief risk officer, oversees the Company’s risk management strategy on behalf of the Management Committee. The Risk and Operational Steering Committee develops and maintains the Company’s risk management policies and procedures, and regularly monitors the significant risks inherent to our business, including investment risk, reputational risk, business continuity risk, information security risk and operational risk. The chief risk officer, head of internal audit, and officers responsible for financial reporting, legal, and compliance periodically report on these matters to the Audit Committee. Based on these reports, the Audit Committee reports and makes recommendations as necessary to the full Board with respect to managing our overall risk.

 

 

Executive Compensation and Management Development
Committee
                         
Meetings in 2020: 5   Chair   Members                
The report of the
Committee appears on
page 51.
           
    MacLellan   Bartlett   Bush   Dublon   Hrabowski   Snowe
                         
                 
        Stevens   Verma   Wijnberg   Wilson    

 

All of the non-employee independent directors of the Board serve on the Compensation Committee. The Board has determined that each of these members meets the independence criteria of the NASDAQ Global Select Market.

 

Responsibilities

 

The Compensation Committee is responsible to the Board, and ultimately to our stockholders, for:

 

Determining the compensation of our President and CEO and other executive officers;

 

Reviewing and approving general salary and compensation policies for the rest of our senior officers;

 

16 T. Rowe Price Group

 

Overseeing the administration of our Annual Incentive Compensation Plan (AICP), equity incentive plans, and Employee Stock Purchase Plan;

 

Assisting management in designing new compensation policies and plans;

 

Reviewing and providing guidance to management concerning succession plans and development actions for key leadership roles;

 

Reviewing and assisting management regarding diversity and inclusion efforts across the Company; and

 

Reviewing and discussing the Compensation Discussion and Analysis contained in this proxy statement and other compensation disclosures with management.

 

Nominating and Corporate Governance Committee
Meetings in 2020: 5   Chair   Members          
The report of the Committee
appears on page 20.
         
    Snowe   Bush   Hrabowski Stevens   Wilson

 

The Board has determined that all Nominating and Corporate Governance Committee members meet the independence criteria of the NASDAQ Global Select Market.

 

Responsibilities

 

The Nominating and Corporate Governance Committee supervises and reviews the affairs of Price Group in relation to the Board, director nominees and compensation, committee composition, stockholder communications, and other corporate governance matters.

 

Among the Nominating and Corporate Governance Committee’s responsibilities are:

 

Identifying, evaluating, and nominating director candidates.

 

Considering the continued membership of each director, and recommending the appropriate skills and characteristics of potential directors.

 

Developing director orientation and education opportunities.

 

Reviewing and approving the compensation of independent directors.

 

Recommending committee and chair assignments.

 

Overseeing procedures regarding stockholder nominations and other communications to the Board.

 

Reviewing the effectiveness of the Board in the corporate governance process.

 

Monitoring compliance with and recommending any changes to the Corporate Governance Guidelines and other governance policies.

 

Monitoring and oversight of, in coordination with the Compensation Committee and the Board, succession planning for the Chief Executive Officer.

 

Overseeing policies related to political expenditures and political activities.

 

Monitoring policies related to environmental and climate matters, and recommending to the Board specific actions related thereto.

 

Reviewing actions in furtherance of the Company’s corporate social responsibility, including the impact of the Company’s processes on employees, stockholders, citizens and communities.

 

Reviewing key trends in legislation, regulation, litigation and public debate to determine whether the Company should consider additional corporate environmental, social responsibility or governance actions.

 

2021 Proxy Statement 17

 

 

 

Executive Committee
Chair   Members    
   
Stromberg   Wilson   MacLellan

 

During 2020, Mr. Stromberg, Mr. MacLellan and Mr. Wilson served on the Executive Committee.

 

Responsibilities

 

The Executive Committee functions between meetings of the Board in the event that prompt action be called for that requires formal action by or on behalf of the Board in circumstances where it is impractical to call and hold a full meeting of the Board. The Executive Committee possesses the authority to exercise all the powers of the Board except as limited by Maryland law.

 

If the Executive Committee acts on matters requiring formal Board action, those acts are reported to the Board at its next meeting for ratification.

 

Governance Policies and Procedures

 

Code of Ethics

 

Pursuant to rules promulgated under the Sarbanes-Oxley Act, the Board has adopted a Code of Ethics for Principal Executive and Senior Financial Officers. This Code is intended to deter wrongdoing and promote honest and ethical conduct; full, timely, and accurate reporting; compliance with laws; and accountability for adherence to the Code, including internal reporting of Code violations. A copy of the Code of Ethics for Principal Executive and Senior Financial Officers is available on our website. We intend to satisfy the disclosure requirements regarding any amendment to, or waiver from, a provision of the Code of Ethics for Principal Executive and Senior Financial Officers by making disclosures concerning such matters available on the Investor Relations page of our website.

 

We also have a Code of Ethics and Conduct that is applicable to all employees and directors of the Company. Our Code of Ethics and Conduct prohibits all employees and directors of the Company from (i) any short sales of our common stock, (ii) purchasing options on our common stock, or (iii) entering into any contract or purchasing any instrument designed to hedge or offset any decrease in the market value of our common stock. It is the Company’s policy for all employees to participate annually in continuing education and training relating to the Code of Ethics and Conduct.

 

Corporate Governance Guidelines

 

The Board represents the interests of stockholders in fostering a business that is successful in all respects. The Board is responsible for determining that the Company is managed with this objective in mind and that management is executing its responsibilities. The Board’s responsibility is to regularly monitor the effectiveness of management policies and decisions, including the execution of its strategies. In addition to fulfilling its obligations for representing the interests of stockholders, the Board has responsibility to the Company’s employees, the mutual funds and investment portfolios that the Company manages, the Company’s other customers and business constituents and the communities where the Company operates. All are essential to a successful business. Our Corporate Governance Guidelines can be found on our website, troweprice.com.

 

Non-Employee Director Independence Determinations

 

The Board has considered the independence of current Board members and nominees not employed by the Company and has concluded each such director qualifies as an independent director within the meaning of the applicable rules of the NASDAQ Global Select Market. To our knowledge, there are no family relationships among our directors or executive officers.

 

18 T. Rowe Price Group

 

 

In making its determination of independence, the Board applied guidelines that it has adopted concluding that the following relationships should not be considered material relationships that would impair a director’s independence:

 

relationships where a director or an immediate family member of a director purchases or acquires investment services, investment securities, or similar products and services from the Company or one of its sponsored mutual funds and trusts (Price funds) so long as the relationship is on terms consistent with those generally available to other persons doing business with the Company, its subsidiaries, or its sponsored investment products; and

 

relationships where a corporation, partnership, or other entity with respect to which a director or an immediate family member of a director is an officer, director, employee, partner, or member purchases services from the Company, including investment management or defined contribution retirement plan services, on terms consistent with those generally available to other entities doing business with the Company or its subsidiaries.

 

The Board believes that this policy sets an appropriate standard for dealing with ordinary course of business relationships that may arise from time to time.

Proposal 1

 

Election of Directors

 

In this proxy statement, eleven director nominees are presented pursuant to the recommendation of the Nominating and Corporate Governance Committee. All have been nominated by the Board to hold office until the next annual meeting of stockholders and until their respective successors are elected and qualify.

 

FOR Recommendation of the Board of Directors Vote Required
We recommend that you vote FOR all the director nominees under Proposal 1.  

 

All properly executed proxies received in time to be tabulated for the Annual Meeting will be voted FOR the election of the director nominees unless otherwise specified. Shares held by a bank, broker, or other nominee will not be voted on this Proposal absent specific instruction from you, which means your shares may go unvoted and not affect the outcome if you do not specify a vote. If any director nominee becomes unable or unwilling to serve between now and the Annual Meeting, proxies will be voted FOR the election of a replacement recommended by the Nominating and Corporate Governance Committee and approved by the Board.

 

2021 Proxy Statement 19

 

Corporate Governance

 

Report of the Nominating and Corporate

Governance Committee

 

Our Nominating and Corporate Governance Committee has general oversight responsibility for governance of the Company, including the assessment and recruitment of new director candidates and the evaluation of director and Board performance. We monitor regulatory and other developments in the governance area with a view toward both legal compliance and maintaining governance procedures at the Company consistent with what we consider to be best practices. In this regard, we routinely receive written and verbal information relating to best governance practices for institutions such as the Company, including input and reports from members of the Company’s proxy voting group concerning relevant trends.

 

Board Engagement In Crisis Response

 

In response to the COVID-19 pandemic, from March through June, the Board began holding bi-weekly special meetings to ensure the Company was well positioned to protect the health and safety of our associates, meet the evolving demands of our clients, and navigate market changes. The Board empowered management to take actions to protect the Company’s associates through remote work programs, supported investments in technology updates and business continuity solutions, and maintained oversight of our balance sheet to ensure the Company’s financial strength. During these meetings the Board also advised on the firm’s internal and external communication strategy and risk mitigation efforts with a view to the long-term success of the enterprise. The Board engaged with management on identifying and addressing strategic risks and opportunities arising out of COVID-19. During the pandemic, we adjusted our planned in-person Board meetings to hold them virtually to ensure continued effective functioning of the Board. Later in the spring, in response to the social unrest which swept across the U.S., the Board and management committed to develop programs and policies supporting the Board’s view that racial injustice was a serious problem which the Company was committed to combat.

 

Governance Highlights

 

Overview

 

Our Board employs practices that foster effective Board oversight of critical matters such as strategy, management succession planning, financial and other controls, risk management and compliance. The Board reviews our major governance policies and processes regularly in the context of current corporate governance trends, regulatory changes and recognized best practices.

 

During the year, the Board determined to heighten its focus on the Company’s environmental, social and governance matters from a corporate perspective. In furtherance of this goal, the Board received various updates from management on the Company’s environmental, social and governance efforts, and ultimately determined to amend the Nominating and Corporate Governance Committee’s charter to include oversight of the Company’s environmental and corporate social responsibility activities, including considering the impact of the Company’s policies and processes on employees, stockholders, citizens and communities. In addition, the Nominating and Corporate Governance Committee’s charter was amended to include oversight of the Company’s policies related to political expenditures and political activities. Of note, however, is that the Company does not contribute corporate funds to candidates, political party committees, political action committees, or any political organization exempt from federal income taxes. Further the Company does not maintain a political action committee and does not spend corporate funds directly on independent expenditures.

 

The Nominating and Corporate Governance Committee works diligently to support effective corporate governance and believes that the Company’s governance program aligns with the Investor Stewardship Group’s (ISG) Corporate Governance Framework for U.S. Listed Companies.

 

20 T. Rowe Price Group

 

ISG Corporate Governance Principles

 

The following sections provide an overview of our corporate governance structure and processes, including key aspects of our Board operations, and how they align with the ISG Corporate Governance Principles for U.S. Listed Companies.

 

 

 

PRINCIPLE   COMPANY PRACTICE
1. Boards are accountable to shareholders.  

  Our directors are elected annually.

 

   Our By-Laws mandate that directors be elected under a “majority voting” standard in uncontested elections. Each director nominee must receive more votes “For” his or her election than votes “Against” in order to be elected. A director who fails to obtain the required vote in an uncontested election must submit his or her resignation to the Board.

 

   We have clear proxy access rules.

 

   We do not have a poison pill plan.

2. Shareholders should be entitled to voting rights in proportion to their economic interest.      We have only one class of stock outstanding, and each share is entitled to one vote.
3. Boards should be responsive to shareholders and be proactive in order to understand their perspectives.  

   Our Company actively engages with stockholders, see page 25.

 

   Our directors participate in our stockholder outreach, both in the preparation for such meetings, and during the presentations themselves.

 

   We have established an email address for stockholders wishing to contact the Board.

4. Boards should have a strong, independent leadership structure.  

   We have a strong lead independent director.

 

   Ten of our eleven board members are independent.

 

   Our independent directors meet frequently without management.

5. Boards should adopt structures and practices that enhance their effectiveness.  

   Our directors have a diverse mix of experience and backgrounds relevant to our industry, our stockholders, our clients, and our stakeholders. See page 7.

 

   The average tenure on our Board is six years.

 

   During the year, the Board receives several key industry updates, strategic topics and other education sessions conducted by both outside experts and Company executives, all designed to assist the Board in executing their duties.

 

   Our directors attended 100% of the Board and Committee meetings, and value in person attendance at meetings.

6. Boards should develop management incentive structures that are aligned with the long-term strategy of the company.  

   Our annual and long-term incentive programs are designed to align the interests of our management with our stockholders by focusing on long-term corporate performance and value creation.

 

   Our executive compensation program received over 95% stockholder support in 2020.

 

   The proxy statement clearly communicates the link between our compensation programs and the Company’s short and long-term performance.

 

2021 Proxy Statement 21

 

Board Composition

 

Director Nomination Process

 

Ongoing Assessment of Composition and Structure

 

In considering the overall qualifications of our nominees and their contributions to our Board, and in determining our need for additional members of the Board, we seek to create a Board consisting of members with a diverse set of experiences and attributes who will be meaningfully involved in our Board activities and will facilitate a transparent and collaborative atmosphere and culture. Our Board members generally develop a long-term association with the Company, which we believe facilitates a deeper knowledge of our business and its strategies, opportunities, risks, and challenges. At the same time, we periodically look for additions to our Board to enhance our capabilities and bring new perspectives and ideas to our Board.

 

Commitment to Diversity and Inclusion

 

The Board has historically valued varying perspectives that individuals of differing backgrounds and experiences bring. We monitor the diversity profile of the Board and consider it an important factor relevant to any particular nominee and to the overall composition of our Board. In considering diversity, we recognize a person’s background and experience as well as their ethnic, gender, sexual orientation, racial, and other factors which we believe will inform the way they consider decisions brought before the Board.

 

Our current Board comprises individuals with a substantial variety of skills and expertise, including with respect to executive management; financial institutions; government; accounting and finance; investment management; public company boards; academia; and not-for-profit organizations. Our Board is not just comprised of individuals knowledgeable about our business, but is also reflective of our clients, the communities we serve and our stakeholders. The Nominating and Corporate Governance Committee believes it is important to maintain a mix of experienced directors with a deep understanding of the Company and newer directors who bring a fresh perspective to the challenges of our industry.

 

Board Replenishment

 

The Board has eleven directors, ten of whom are independent. The tenure of our independent directors’ ranges from eighteen months to eleven years, with an average tenure of approximately six years. In considering Board membership, the Nominating and Corporate Governance Committee focuses on identifying candidates with the skills and backgrounds to complement the Board, in addition to seeking candidates who would bring further capabilities, experience, and diversity to our Board.

 

Incumbent Nominations

 

The Nominating and Corporate Governance Committee supervises the nomination process for directors. The committee considers the performance, independence, diversity, and other characteristics of our incumbent directors, including their willingness to serve for an additional term, and any change in their employment or other circumstances in considering their renomination each year.

 

Identification and Consideration of New Nominees

 

In the event that a vacancy exists, or we decide to increase the size of the Board, we identify, interview and examine, and make recommendations to the Board regarding appropriate candidates. We will consider Board members with diverse capabilities, and we generally look for Board members with capabilities in one or more of the following areas: accounting and financial reporting, financial services and money management, investments, general economics and industry oversight, legal, government affairs and corporate governance, general management, international, marketing and distribution, and technology and facilities management. In evaluating potential candidates, we consider independence from management, background, experience, expertise, commitment, diversity, number of other public board and related committee seats held, and potential conflicts of interest, among other factors, and take into account the composition of the Board at the time of the assessment. All candidates for nomination must:

 

demonstrate unimpeachable character and integrity;

 

have sufficient time to carry out their duties;

 

have experience at senior levels in areas of expertise helpful to the Company and consistent with the objective of having a diverse and well-rounded Board; and

 

  have the willingness and commitment to assume the responsibilities required of a director of the Company.

 

22 T. Rowe Price Group

 

In addition, candidates expected to serve on the Audit Committee must meet independence and financial literacy qualifications imposed by the NASDAQ Global Select Market and by the SEC and other applicable law. Candidates expected to serve on this committee or the Compensation Committee must meet independence qualifications set out by the NASDAQ Global Select Market, and members of the Compensation Committee must also meet additional independence tests imposed by the NASDAQ Global Select Market. Our evaluations of potential directors include, among other things, an assessment of a candidate’s background and credentials, personal interviews, and discussions with appropriate references. Once we have selected a candidate, we present him or her to the full Board for election if a vacancy occurs or is created by an increase in the size of the Board during the course of the year, or for nomination if the director is to be first elected by the Company’s stockholders. All directors serve for one-year terms and must stand for reelection annually.

 

 

Identification of Candidates

 

The Nominating and Corporate Governance Committee identifies, interviews and examines, and makes recommendations to the Board regarding appropriate candidates. The Nominating and Corporate Governance Committee identifies potential candidates principally through the following:

 

•  Consideration of incumbent directors

 

•  Suggestions from the Company’s directors and senior management

 

•  Third parties/national search organization

 

•  Candidates recommended or suggested by stockholders

Evaluation of Candidates

 

The Nominating and Corporate Governance Committee’s evaluations of potential directors include the following:

 

•  An assessment of a candidate’s background and credentials

 

•  Personal interviews

 

•  Discussions with appropriate references

 

Election of Candidates

 

Once the Nominating and Corporate Governance Committee has selected a candidate, the candidate is presented to the full Board for election if a vacancy occurs or is created by an increase in the size of the Board during the course of the year, or for nomination if the director is to be first elected by the Company’s stockholders.

 

 

Stockholder Recommendations and Nominations

 

Recommendations

 

A stockholder who wishes to recommend a candidate for the Board should send a letter to the chair of the Nominating and Corporate Governance Committee at the Company’s principal executive offices providing: (i) information relevant to the candidate’s satisfaction of the criteria described above under “Director Nomination Process”; and (ii) information that would be required for a director nomination under Section 1.11 of the Company’s Amended and Restated By-Laws (By-Laws). The Nominating and Corporate Governance Committee will consider and evaluate candidates recommended by stockholders in the same manner it considers candidates from other sources. Acceptance of a recommendation does not imply that the Nominating and Corporate Governance Committee will ultimately nominate the recommended candidate.

 

Proxy Access and Nominations

 

We have adopted a proxy access right to permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years, to nominate and include in the Company’s proxy materials director-nominees constituting up to two individuals or 20% of the Board (whichever is greater), provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in the By-Laws. Section 1.13 of the By-Laws sets out the procedures a stockholder must follow to use proxy access. Section 1.11 of the By-Laws sets out the procedures a stockholder must follow in order to nominate a candidate for Board membership outside of the proxy access process. For these requirements, please refer to the By-Laws as of February 9, 2021, filed with the SEC on February 11, 2021, as Exhibit 3.1 to our Annual Report on Form 10-K.

 

2021 Proxy Statement 23

 

 

Majority Voting

 

We have adopted a majority voting standard for the election of our directors. Under our By-Laws, in an uncontested election, a nominee will not be elected unless he or she receives more “FOR” votes than “AGAINST” votes. Under Maryland law, any incumbent director not so elected would continue in office as a “holdover” director until removed or replaced. As a result, the By-Laws also provide that any director who fails to obtain the required vote in an uncontested election must submit his or her resignation to the Board. The Board must decide whether to accept or decline the resignation, or decline the resignation with conditions, taking into consideration the Nominating and Corporate Governance Committee’s recommendation after consideration of all factors deemed relevant, within 90 days after the vote has been certified. Plurality voting will apply to contested elections.

 

Board Leadership

 

Chair of the Board and Lead Independent Director

 

   
William J. Stromberg
Chair of the Board
    Alan D. Wilson
Lead Independent Director
       

Mr. Stromberg was elected as the chair of the Board in addition to his role as our President and CEO at the April 2019 Board meeting. By serving in both positions, Mr. Stromberg has been able to draw on his detailed knowledge of the Company to provide leadership to the Board in coordination with the lead independent director. The combined role of chair and CEO reflects our confidence in the leadership of Mr. Stromberg and also ensures that the Company presents its strategy to clients, employees and stockholders with a unified voice from the person most knowledgeable about and responsible for the implementation of the Company’s strategy.

 

   

Mr. Wilson was elected by our independent directors as lead independent director after the 2018 Annual Meeting and is expected to be re-elected after the Annual Meeting. The lead independent director role was created in 2004 and has continually developed since that time. The lead independent director chairs Board meetings at which the chair is not present, approves Board agendas and meeting schedules, and oversees Board materials distributed in advance of Board meetings. The lead independent director also calls meetings of the independent directors, chairs all executive sessions of the independent directors, and acts as liaison between the independent directors and management. The lead independent director is available to the general counsel and corporate secretary to discuss and, as necessary, respond to stockholder communications to the Board.

 

Mr. Wilson’s significant executive management experience, including having served as chair and chief executive officer of a publicly traded company, makes him especially qualified to serve as the lead independent director for the Board.

 

Independent Leadership

 

The Board has determined that the election of a lead independent director, together with a combined chair and CEO, serve the best interests of the Company and its stockholders at this time. We believe that a well-empowered lead independent director provides independent leadership to our Board. The Company has a strong independent Board, and all of the members of the Board, other than Mr. Stromberg, are independent under the NASDAQ Global Select Market standards. In addition, the Nominating and Corporate Governance Committee, the Audit Committee, and the Compensation Committee are all composed entirely of independent directors, and our chair and lead independent director, together with these committees, have significant and meaningful responsibilities designed to foster critical oversight and good governance practices. We believe that our structure is appropriate at this time and serves well the interests of the Company and its stockholders.

 

24 T. Rowe Price Group

 

 

The Board is confident that the duties and responsibilities allocated to its lead independent director, together with its other corporate governance practices and strong independent board, provides appropriate and effective independent oversight of management.

 

Committee Leadership and Rotation

 

In 2015, Mr. Bartlett became the chair of the Audit Committee, Mr. MacLellan became the chair of the Compensation Committee and Ms. Snowe became the chair of the Nominating and Corporate Governance Committee. Our Corporate Governance Guidelines provide that periodic rotation of committee membership and chairpersons is generally beneficial to the Company, and contributes to healthy and collaborative Board engagement. However, this rotation is not mandatory, and in some circumstances continued service on a committee or as chair by persons with particular skills may be warranted. At least every 5 years, the Nominating and Corporate Governance Committee shall do a thorough review of all Board leadership positions to make recommendations to the Board about potential changes and to suggest skills which may be needed on the committees.

 

Board Evaluations

 

In January 2021, we asked all Board members to reply to an anonymous evaluation questionnaire regarding the performance of the Board and its committees during 2020, which evaluation was conducted by an outside third-party in consultation with the Chair of the Nominating and Corporate Governance Committee and the Lead Independent Director. Feedback from these questionnaires was supplemented by interviews of each independent director by our Lead Independent Director. The results of the evaluations and interviews were then discussed at a meeting of the Nominating and Corporate Governance Committee and a full report was also provided to the Board. Consistent with past practice, we consider suggestions from the evaluation process for inclusion during the course of the upcoming year. We plan to continue to conduct independent third-party evaluations and interviews each year and to periodically modify our procedures to ensure that we receive candid feedback and are responsive to future developments and suggestions from our directors.

 

 

Engagement with our Stockholders

 

As investment professionals, we know the value of engaging with companies. We maintain an active and open dialogue with our stockholders, visiting them in their cities, hosting them in our offices, and inviting them to our annual meeting of stockholders. We proactively engage them on a range of topics including corporate governance, and our philosophy and practices relating to environmental and social responsibility. We attempt to incorporate and address the feedback we receive from our stockholders into our practices. The work-from-home environment as a result of the coronavirus pandemic created new opportunities to engage our stockholders in 2020. We held nearly 100 meetings with our stockholders in the virtual environment, including a majority of our top 40 stockholders, to discuss the Company’s performance and progress against our long-term strategy, as well as broader trends across the investment management industry. Further, in an effort to provide greater transparency around

 

2021 Proxy Statement 25

 

 

our efforts and progress related to our environmental, social and governance initiatives, we also published our first-ever Corporate ESG Update for Stockholders. We look forward to continuing to expand our stockholder engagement efforts.

 

HOW   WHAT

•  Attendance at Conferences

 

•  Investor Day

 

•  Incoming stockholder calls and meetings

 

•  Annual Meeting of Stockholders

 

•  Outreach, calls and meetings with Investors’ corporate governance departments

 

•  Participation on industry panels

 

•  Universal access to an email address for stockholders wishing to contact the Board

 

•  Strategic and financial performance and goals

 

•  Corporate and business strategy

 

•  Board composition and leadership structure

 

•  Corporate governance and industry trends, including ESG considerations

 

•  Regulatory considerations

 

•  Respond to inquiries concerning broad range of topics

 

Stockholder Proposals

 

From time to time, we receive proposals from our stockholders intended for inclusion in our proxy statement. We typically work with Company management in reviewing these proposals and determining an appropriate course of action in response, including, where necessary, a statement of our position for or in opposition to the proposal from the stockholder. Often in response the Board will ask management to engage with a stockholder on their proposal, which has led to meaningful dialogue and assisted the Board in understanding the concerns of our stockholders.

 

Stockholder Communications with the Board of Directors

 

Our Board members are interested in hearing the opinions of the stockholders. The Nominating and Corporate Governance Committee has established the following procedures in order to facilitate communications between our stockholders and our Board:

 

Stockholders may send correspondence, which should indicate that the sender is a stockholder, to our Board or to any individual director by mail to T. Rowe Price Group, Inc., c/o general counsel, P.O. Box 17134, Baltimore, MD 21297-1134, or by email to contact_the_board@troweprice.com or by Internet at troweprice.gcs-web.com/corporate-governance/contact-the-board.
   
Our general counsel will be responsible for the first review and logging of this correspondence. The general counsel will forward the communication to the director or directors to whom it is addressed unless it is a type of correspondence that the Nominating and Corporate Governance Committee has identified as correspondence that may be retained in our files and not sent to directors.
   
The Nominating and Corporate Governance Committee has authorized the general counsel to retain and not send to directors the following types of communications:

 

  Advertising or promotional in nature (offering goods or services);
     
  Complaints by clients with respect to ordinary course of business customer service and satisfaction issues; provided, however, that the general counsel will notify the chair of the Nominating and Corporate Governance Committee of any complaints that, in the opinion of the general counsel, warrant immediate committee attention by their nature or frequency; or
     
  Those clearly unrelated to our business, industry, management, Board, or committee matters.

 

These types of communications will be logged and filed but not circulated to directors. Except as described above, the general counsel will not screen communications sent to directors.

 

The log of stockholder correspondence will be available to members of the Nominating and Corporate Governance Committee for inspection. At least once each year, the general counsel will provide to the Nominating and Corporate Governance Committee a summary of the communications received from stockholders, including the communications not sent to directors in accordance with screening procedures approved by the Nominating and Corporate Governance Committee.

 

By the Nominating and Corporate Governance Committee of the
Board of Directors of T. Rowe Price Group, Inc.

 

  Olympia J. Snowe, Chair
Mary K. Bush
Dr. Freeman A. Hrabowski, III
Robert J. Stevens
Alan D. Wilson

 

26 T. Rowe Price Group

 

Compensation of Directors

 

The Nominating and Corporate Governance Committee is responsible for periodically reviewing non-employee director compensation and benefits and recommending changes, if appropriate, to the full Board. Our non-employee director compensation program is designed to accomplish a number of objectives:

 

Align the interests of our non-employee directors with those of our stockholders;

 

Provide competitive compensation for service to the Board by our non-employee directors;

 

Maintain appropriate consistency with our approach to compensation for our executive officers and senior employees; and

 

Attract and retain a diverse mix of capable and highly qualified directors.

 

We provide both cash and equity compensation to our directors and believe that, over time, cash and equity compensation should reflect approximately 40% and 60%, respectively, of the total compensation paid to our directors. The cash compensation component is based primarily on an annual retainer coupled with fees for committee attendance, lead director role, and committee chair roles. The equity compensation component is in the form of full value awards. We believe our total compensation package and compensation structure is comparable to and in line with other major financial service companies.

 

The Nominating and Corporate Governance Committee periodically reviews and considers competitive market practices. In 2020 there were no changes to the compensation program for our non-employee directors.

 

Fees and Other Compensation in 2020

 

All non-employee directors received the following in 2020:

 

An annual retainer of $100,000 for all non-employee directors;

 

A fee of $1,500 for each committee meeting attended;

 

A fee of $15,000 for the lead director;

 

A fee of $20,000 and $5,000, for the chair of the Audit Committee and each Audit Committee member, respectively;

 

A fee of $10,000 for the chair of the Compensation Committee;

 

A fee of $10,000 for the chair of the Nominating and Corporate Governance Committee;

 

Directors and all U.S. employees of Price Group and its subsidiaries are eligible to have our sponsored T. Rowe Price Foundation match personal gifts up to an annual limit to qualified charitable organizations. For 2020, non-employee directors were eligible to have up to $10,000 matched;

 

The reimbursement of reasonable out-of-pocket expenses incurred in connection with their travel to and from, and attendance at each meeting of the Board and its committees and related activities, including director education courses and materials; and

 

The reimbursement of spousal travel to and from and participation in events held in connection with the annual joint Price Group and Price funds’ boards of directors meeting.

 

The annual retainer and fees noted above are prorated for the period of time during the calendar year that each director held the position. Pursuant to the Outside Directors Deferred Compensation Plan, non-employee directors can elect to defer payment of their director fees until the next calendar year or to defer payment of their director fees into vested restricted stock units (RSUs) pursuant to the 2017 Non-Employee Director Equity Plan, as amended (2017 Director Plan). The RSUs will be settled in shares of our common stock, or cash in the case of fractional shares, upon the director’s separation from service. Any such election needs to be received prior to the beginning of the year they wish to have their payment deferred. Dr. Hrabowski and Ms. Snowe elected to have their 2020 director fees deferred to 2021. Messrs. MacLellan, Stevens, Wilson and Ms. Wijnberg elected to have their 2020 director fees deferred into vested RSUs.

 

2021 Proxy Statement 27

 

 

Equity-Based Compensation in 2020

 

Pursuant to the 2017 Director Plan, each newly elected Board member is awarded an initial grant in the form, at their election, of restricted shares or RSUs having a value on the date of grant of $300,000 that vests one-year after the grant date. In each subsequent year, each non-employee director is awarded, at their election, restricted shares or RSUs having a value on the date of grant of $200,000 on the first business day after the Annual Meeting. Each of the award types vest upon the earliest of one year after the grant date, or the day before the annual meeting held in the calendar year after the year in which the grant is made, the non-employee director’s death or date on which the director becomes totally and permanently disabled, or the date on which a change in control occurs, provided the director continues to be a member of the Board on the applicable date.

 

Restricted shares entitle the holder to the rights of a stockholder, including voting, dividend, and distribution rights, but are nontransferable until they vest. Vested stock units will be settled in shares of our common stock or cash, in the case of fractional shares, upon a non-employee director’s separation from service. Non-employee directors holding stock units are not entitled to voting, dividend, distribution, or other rights until the corresponding shares of our common stock are issued upon settlement; however, if and when we pay a cash dividend to our common stockholders, we will issue dividend equivalents in the form of additional stock units. Under the 2017 Director Plan, dividends and dividend equivalents payable with respect to unvested restricted shares and unvested stock units will be subject to the same vesting and risks of forfeiture as the restricted shares and stock units to which they are attributable. The 2017 Director Plan includes a provision that accelerates the vesting of all outstanding awards in connection with a change in control of Price Group. Upon a change in control, any outstanding stock units will be settled in cash or shares at the discretion of the Board.

 

Ownership and Retention Guidelines

 

Each non-employee director added to the Board prior to 2017 is required to hold shares of our common stock, within five years of their appointment to the Board, having a value equal to three times the applicable cash retainer at the time they joined. The cash retainer amount was $300,000 in 2015 and 2016, and $225,000 prior to 2015. Directors who were new to the Board in 2017 or who will join in the future, have an ownership goal of five times the annual cash retainer in effect on the date they join the Board. For purposes of the calculation, unvested restricted shares and outstanding stock units are counted, but unexercised stock options are not. Once this ownership goal is achieved, the number of shares required to be held becomes fixed and must be maintained until the end of the director’s service on the Board. Until the ownership goal is achieved, the director is expected to retain “net gain shares” resulting from the exercise of stock options or vesting of restricted stock granted under the applicable director plan. Net gain shares are the shares remaining after payment of the stock option exercise price and taxes owed with respect to the exercise or vesting event. All of our directors have achieved and maintain the ownership goal as of the date of this proxy statement.

 

28 T. Rowe Price Group

 

 

2020 Director Compensation1

 

The following table sets forth information regarding the compensation earned by, or paid to, directors who served on our Board during 2020. As an officer of Price Group, Mr. Stromberg does not receive separate directors’ fees so he has been omitted from this table. Mr. Stromberg appears in our Summary Compensation Table as a NEO.

 

NAME   FEES EARNED
OR PAID IN CASH
    STOCK
AWARDS
2,3
    ALL OTHER
COMPENSATION4
  TOTAL  
Mark S. Bartlett   $ 135,000       $200,013                $ 10,000     $345,013  
Mary K. Bush   $ 115,000       $250,939     $ 10,000     $375,939  
Dina Dublon   $ 120,000       $215,565     $ 10,000     $345,565  
Dr. Freeman A. Hrabowski, III   $ 118,583       $248,550     $ 10,000     $377,133  
Robert F. MacLellan   $       $350,125     $ 10,000     $360,125  
Olympia J. Snowe   $ 125,000       $240,200     $ 10,000     $375,200  
Robert J. Stevens   $       $331,454     $     $331,454  
Richard R. Verma   $ 120,000       $221,991     $ 10,000     $350,991  
Sandra S. Wijnberg   $       $338,214     $ 10,000     $348,214  
Alan D. Wilson   $       $389,223     $     $389,223  

 

1 Includes only those columns relating to compensation awarded to, earned by, or paid to non-employee directors for their services in 2020. All other columns have been omitted.
   
2 The following table represents the equity awards granted in 2020 to certain of the non-employee directors named above. In accordance with the 2017 Director Plan, each non-employee director was awarded a grant date value of $200,000. In addition pursuant to our 2017 Director Plan, some directors elected to have their fees, which are typically paid semi-annually, deferred into RSUs. The holders of RSUs also receive dividend equivalents in the form of additional vested stock units on each of the Company’s quarterly dividend payment dates. The award value or dividend equivalent value was converted to awards or units, using the closing stock price of our common stock on the date of grant. Fractional shares were rounded up to the nearest whole share.

 

                GRANT DATE
        NUMBER OF   NUMBER OF   FAIR VALUE OF
        RESTRICTED   RESTRICTED   STOCK AND
DIRECTOR GRANT DATE SHARES   UNITS   OPTION AWARDS
                   
Mark S. Bartlett   5/13/2020   1,853       $ 200,013
Mary K. Bush 3/30/2020       127   $ 12,577
                   
    5/13/2020   1,853       $ 200,013
                   
    6/30/2020       103   $ 12,691
                   
    9/29/2020       100   $ 12,784
                   
    12/30/2020       86   $ 12,874
                   
Dina Dublon 3/30/2020       26   $ 2,596
    5/13/2020       1,853   $ 200,013
    6/30/2020       35     4,288
    9/29/2020       34   $ 4,319
    12/30/2020       29   $ 4,349
Dr. Freeman A. Hrabowski, III 3/30/2020       109   $ 10,742
                   
    5/13/2020       1,853   $ 200,013
                   
    6/30/2020       101   $ 12,508
                   
    9/29/2020       99   $ 12,599
                   
    12/30/2020       85   $ 12,688
                   
Robert F. MacLellan 3/30/2020       48   $ 4,732
    5/13/2020   1,853       $ 200,013
    6/30/2020       566   $ 69,775
    9/29/2020       41   $ 5,284
    12/30/2020       471   $ 70,321

 

 

2021 Proxy Statement 29

 

 

                GRANT DATE
        NUMBER OF   NUMBER OF   FAIR VALUE OF
        RESTRICTED   RESTRICTED   STOCK AND
DIRECTOR GRANT DATE SHARES   UNITS   OPTION AWARDS
                   
Olympia J. Snowe 3/30/2020       88   $ 8,680
                   
    5/13/2020       1,853   $ 200,013
                   
    6/30/2020       84   $ 10,427
                   
    9/29/2020       82   $ 10,503
                   
    12/30/2020       71   $ 10,577
                   
Robert J. Stevens 3/30/2020       26   $ 2,596
    5/13/2020       1,853   $ 200,013
    6/30/2020       489     60,357
    9/29/2020       37   $ 4,727
    12/30/2020       427   $ 63,761
Richard R. Verma 3/30/2020       42   $ 4,183
                   
    5/13/2020       1,853   $ 200,013
                   
    6/30/2020       48   $ 5,889
                   
    9/29/2020       46   $ 5,932
                   
    12/30/2020       40   $ 5,974
                   
Sandra S. Wijnberg 3/30/2020       43   $ 4,278
    5/13/2020   1,853       $ 200,013
    6/30/2020       521   $ 64,317
    9/29/2020       38   $ 4,786
    12/30/2020       434   $ 64,820
Alan D. Wilson 3/30/2020       133   $ 13,123
                   
    5/13/2020       1,853   $ 200,013
                   
    6/30/2020       636   $ 78,513
                   
    9/29/2020       121   $ 15,482
                   
    12/30/2020       549   $ 82,092
                   

 

3 The following table represents the aggregate number of equity awards outstanding as of December 31, 2020.

 

    UNVESTED   UNVESTED   UNEXERCISED       VESTED
DIRECTOR STOCK AWARDS   STOCK UNITS   OPTION AWARDS   TOTAL STOCK UNITS
                     
Mark S. Bartlett   1,853           1,853    
Mary K. Bush 1,853           1,853   14,391
                     
Dina Dublon       1,891       1,891   2,971
Dr. Freeman A. Hrabowski, III     1,891   26,008   27,899   12,292
                     
Robert F. MacLellan 1,853       26,008   27,861   6,383
Olympia J. Snowe     1,891       1,891   9,932
                     
Robert J. Stevens       1,891       1,891   3,826
Richard R. Verma     1,891       1,891   4,786
                     
Sandra S. Wijnberg   1,853           1,853   5,789
Alan D. Wilson     1,891       1,891   15,982
                     

 

4 The amounts represent personal gifts matched by our sponsored T. Rowe Price Foundation to qualified charitable organizations.

 

30 T. Rowe Price Group

 

 

 

Human Capital

 

Our People Drive Our Success

 

At T. Rowe Price, our people set us apart. We thrive because our Company culture is based on collaboration and diversity. We believe that our culture of collaboration enables us to identify opportunities others might overlook. Our associates’ knowledge, insight, enthusiasm, and creativity are the reasons our clients succeed and our firm excels. In order to attract and retain the highest quality talent, we develop key talent and succession plans, invest in Company diversity, equity and inclusion initiatives, provide opportunities for our associates to learn and grow, and provide strong benefits. As evidence of the success of our approach the average tenure of our associates is 8 years, and the average tenure of our investment professionals is 22 years.

 

Investing In Our People

 

At T. Rowe Price, we seek to help our clients achieve their long-term investment goals. In order to do this, we are committed to helping our associates achieve their long-term career goals. As part of this commitment, we seek to identify new opportunities within our firm for associates to expand their experience and grow their skills. As a result of allowing our associates to develop these skills we are able to promote from within, reflected by the fact that approximately 35% of our open positions are filled by internal applicants. We are committed to the professional growth of our associates through the development of our associates’ knowledge, skills and experience, by providing them access to in person and online training programs and by offering a generous tuition reimbursement program. We believe a critical driver of our firm’s future growth is our ability to grow leaders. Pursuant to this, we have held a series of leadership speaker events and offer our associates access to virtual programs focused on leadership development led by professors at leading universities.

 

Hiring Diverse Talent

 

In today’s dynamic business environment, having a diverse and inclusive workforce and providing an equal opportunity to all associates is a business and cultural imperative. Our priority is to increase our hiring, retention and development of talent from groups that are underrepresented in asset management; this includes both minorities and women. In 2020, 21% of our investment professionals globally were female and firm-wide 63% of new hires were either female or ethnically diverse. For every open senior role at the firm, our goal is that at least 30% of the candidates interviewed will be ethnically diverse and/or female.

 

We believe a key component of combating racial inequality and injustice is greater representation of minorities in all areas of society and business—including at T. Rowe Price. To increase the pipeline of diverse candidates, we have created partnerships with historically black colleges and universities, latinx-serving institutions, and other colleges and universities with which we have had success in recruiting diverse talent in the United States. Other initiatives connect with prospective and future minority and female candidates as early as high school, through college, and on into graduate school. Throughout each year, we host on-site mentoring and recruitment initiatives in all U.S. offices and London, encouraging and attracting diverse candidates to consider careers in asset management. We remain steadfast in our commitment to supporting a diverse and inclusive workplace.

 

An Inclusive Work Environment

 

T. Rowe Price emphasizes a positive, welcoming, and collaborative culture, where associates are encouraged to be themselves—to draw from their experiences, express their viewpoints, and take the initiative to help our clients succeed. Diversity, equity and inclusion are pillars of our business approach. Our Management Committee ensures we are setting high standards for the way we recruit, hire, mentor and develop talent and establish and maintain work environments in every one of our business units in order to achieve these pillars. To support this, our Diversity and Inclusion Steering Committee (DISC) meets bi-monthly to discuss progress on specific diversity and inclusion initiatives and related challenges and concerns. We have developed a plan to provide additional programs to strengthen the experience and support for underrepresented minorities.

 

2021 Proxy Statement 31

 

 

 

How We Support Our Diverse Perspectives

 

Business Resource Groups provide important perspectives that help shape our company culture, especially in recruitment, talent acquisition and retention. Our business resource groups are open to all associates and provide valuable insight and programs to strengthen our inclusive culture, support career development of associates, extend our brand in the community and provide insight on delivering our services in the marketplace. T. Rowe Price business resource groups include:

 

MOSAIC—Providing guidance and leadership to strengthen the attraction, retention and experience of ethnically diverse personnel.

 

VALOR—Providing guidance and leadership to strengthen attraction, retention and experience of veterans, active reservists and their families.

 

PRIDE—Providing guidance and leadership to strengthen attraction, retention and experience of LGBTQ+ personnel and allies.

 

WAVE—Providing guidance and leadership to strengthen the attraction, retention and experience of women.

 

Black Leadership Council—We formed a Black Leadership Council empowered to recommend to the Management Committee improvements to our black associate advancement strategy.

 

At the end of 2020, forty-one percent (41%) of associates were members of at least one business resource group.

 

Offering Benefits to Further Our Commitment

 

In all of our global locations, we offer employee benefit solutions, including both healthcare and retirement benefits, where applicable, fitness club reimbursement, life insurance, and an Employee Assistance Program to support well-being. Benefit competitiveness and design is assessed within the relevant market for a given country, and offerings are aligned with our global principles and local market practice. For example, retirement programs are uniquely designed to support associates in meeting retirement goals while also reflecting regional and country-specific practices in Asia, Europe, and the U.S.

 

Focus on Family

 

We have always emphasized the importance of spending quality time away from work. In addition to generous vacation time, the firm offers fully paid maternity leave for birth mothers, in addition to fully paid parental leave to all new mothers and fathers. We also provide adoption assistance to associates looking to expand their families. In the U.S., the UK, and Canada, we offer our associates backup child-care and eldercare.

 

Managing Our Employee’s Safety and Well-being Through a Pandemic

 

During 2020, our firm mobilized to ensure the safety of all our associates globally. Beginning first in the APAC region, and then worldwide, we migrated to a work from home environment for approximately 97% of our associates. We expanded our offerings for child and elder care assistance for our associates, and ensured that our health care coverage included COVID-19 testing and treatment. In response to the challenging situation, we offered our associates five additional wellness days along with free counseling through our Employee Assistance Program.

 

Our Efforts in Reaction to Racial Inequity and Social Unrest

 

As a Baltimore-based company, we have witnessed racial inequity firsthand as a systemic issue. Over the years, our associates have generously supported programs that address structural racism and disinvestment in our communities. The T. Rowe Price Foundation has partnered with local and national experts to learn about inequity and to incorporate these insights into its grant-making strategy. Together, our firm and our associates have quietly but consistently worked to bring about change. As a step toward furthering progress, our company donated $2 million toward racial justice causes. In addition, we enhanced internal programs that increased awareness of racial injustice, allowed our associates to have constructive conversations with each other about it, with the goal of having our Company become more inclusive and more diverse. For example, during the year we held numerous diversity dialogues where associates in small settings were able to share their experiences in an effort to make all our associates aware of how systemic racism, gender discrimination or homophobia impacts their colleagues’ lives in a direct and personal way.

 

32 T. Rowe Price Group

 

 

Executive Compensation

 

Compensation Discussion & Analysis

 

The Compensation Discussion and Analysis (CD&A) provides an overview and analysis of our executive compensation philosophy, addresses the principal elements used to compensate our executive officers and explains how our executive compensation design aligns with the Company’s strategic objectives. We also address the 2020 compensation decisions and the rationale for those determinations for our NEOs. This CD&A should be read together with the compensation tables that follow this section. Our NEOs for 2020 were as follows:

 

 

       
William J. Stromberg   Céline S. Dufétel   Robert W. Sharps   Christopher D. Alderson(1)   Eric L. Veiel
Chair and Chief
Executive Officer
  Chief Operating Officer,
Chief Financial Officer
and Treasurer
  President, Head of
Investments, and Group
Chief Investment Officer
  Co-Head of Global Equity   Co-Head of Global Equity

 

Executive Summary

 

Our compensation programs recognize and reward performance, with a focus on rewarding the achievements of our NEOs, as measured by a number of factors over the short-term and long-term. Those factors include:

 

the financial performance and financial stability of Price Group;

 

relative investment performance of our investment products; and

 

performance of our NEOs against pre-determined corporate and individual goals.

 

Our compensation programs are also designed to reward NEOs for their contributions to the Company’s culture, service quality, customer retention, risk management, corporate reputation, and to the quality and collaboration of our associates. A significant portion of NEO compensation is performance-based and includes a material long-term incentive component tied to Company stock performance, thereby ensuring compensation is dependent on the Company’s short-term and longer-term performance.

 

Overall, we were pleased with our results during 2020. We continued to perform well for our clients while achieving strong financial results for the Company. Below is a summary of results for key measures that the Compensation Committee considers when NEO performance and making annual and long-term incentive compensation decisions.

 

(1)Mr. Alderson ceased being an executive officer and retired from the Company effective December 31, 2020.

 

2021 Proxy Statement 33

 

 

2020 Financial Performance Highlights

 

Our net revenues and earnings per share grew significantly over the last five years. Results for 2020 in comparison to the prior two years and 2015 (five years) are as follows:

 

 

 

Our AUM increased by $263.7 billion from December 31, 2019, to $1,470.5 billion as of December 31, 2020 and our average AUM for 2020 increased 12.5% over the 2019 period. Clients added $5.6 billion, while market appreciation and income increased AUM by $256.9 billion. The firm also acquired client contracts from PNC Bank in September 2020 that added $1.2 billion of stable value assets under management

 

Organic AUM growth of 0.5% was driven primarily by strong flows from both institutional and intermediary clients in APAC and EMEA, including success in our local Japanese funds and SICAV funds. The flows in APAC and EMEA were mostly offset by ongoing pressure from passive in U.S. Equity, and headwinds in our Target Date franchise, in part driven by the CARES Act.

 

Our net revenues increased 10.5% over 2019, while our average AUM increased 12.5%, due primarily to client transfers to lower fee share classes and vehicles and money market fee waivers, which the firm began implementing in the second quarter of 2020, in order to maintain positive yield for investors.

 

Our overall financial condition remains very strong, as we finished the year with $7.7 billion of stockholders’ equity, $4.2 billion of cash and discretionary investments, and no debt. We also had redeemable seed capital investments in T. Rowe Price investment products of $1.2 billion at December 31, 2020.

 

Our strong balance sheet and operating results enabled us to return $2.0 billion, or 86% of 2020 net income, to stockholders through dividends and share repurchases. In 2020, we increased our annual recurring dividend for the 34th consecutive year, by 18.4%. In 2020, we expended $1.2 billion to repurchase 10.9 million shares, or 4.6% of our outstanding common stock at an average price of $109.30 per share. Dividends and stock repurchases vary depending upon our financial performance, liquidity, market conditions, and other relevant factors.

 

34 T. Rowe Price Group

 

 

2020 Strategic Performance Highlights

 

Investment Performance

 

Strong investment performance and brand awareness are key drivers in attracting and retaining assets—and to our long-term success. The table below presents investment performance for specific asset classes and AUM weighted performance, of the Price funds performance against passive peers, and composite performance against benchmarks for the one-, three-, five-, and 10-years ended December 31, 2020. Past performance is no guarantee of future results.

 

    1 YEAR   3 YEARS   5 YEARS   10 YEARS
% of U.S. mutual funds that outperformed Morningstar median1, 2                
Equity   65%   71%   66%   85%
Fixed Income   54%   55%   58%   57%
Multi-Asset   94%   94%   85%   90%
All Funds   70%   72%   69%   77%
                 
% of U.S. mutual funds that outperformed passive peer median1, 3                
Equity   52%   67%   64%   68%
Fixed Income   72%   59%   54%   47%
Multi-Asset   91%   82%   70%   86%
All Funds   69%   69%   63%   67%
                 
% of composites that outperformed benchmarks4                
Equity   60%   65%   70%   77%
Fixed Income   66%   56%   67%   68%
All Composites   62%   62%   68%   74%

 

AUM-Weighted Performance   1 YEAR   3 YEARS   5 YEARS   10 YEARS
% of U.S. mutual funds that outperformed Morningstar median1, 2                
Equity   76%   79%   84%   92%
Fixed Income   43%   51%   57%   59%
Multi-Asset   100%   97%   96%   97%
All Funds   79%   81%   85%   90%
                 
% of U.S. mutual funds that outperformed passive peer median1, 3                
Equity   39%   81%   77%   73%
Fixed Income   58%   50%   37%   43%
Multi-Asset   95%   96%   95%   96%
All Funds   54%   83%   79%   77%
                 
% of composites that outperformed benchmarks4                
Equity   70%   71%   73%   73%
Fixed Income   53%   47%   49%   72%
All Composites   67%   67%   69%   73%

 

As of December 31, 2020, 73 of 123 (59%) of our rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar’s fund population is given a rate of four or five stars5. In addition, 84% of AUM in our rated U.S. mutual funds (across primary share classes) ended 2020 with an overall rating of four or five stars.
   
1 Source: © 2020 Morningstar, Inc. All rights reserved. The information contained herein: 1) is proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

 

2021 Proxy Statement 35

 

2Source: Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the Morningstar category median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total Fund AUM included for this analysis includes $493B for 1 year, $493B for 3 years, $493B for 5 years, and $484B for 10 years.

 

3Passive Peer Median was created by T. Rowe Price using data from Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. This analysis compares T. Rowe Price active funds to the applicable universe of passive/index open-end funds and ETFs of peer firms. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the passive peer universe. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $475B for 1 year, $473B for 3 years, $432B for 5 years, and $411B for 10 years.

 

4Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared to official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that are outperforming their benchmarks. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,355B for 1 year, $1,353B for 3 years, $1,328B for 5 years, and $1,290B for 10 years.

 

5The Morningstar RatingTM for funds is calculated for funds with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Morningstar gives its best ratings of 5 or 4 stars to the top 32.5% of all funds (of the 32.5%, 10% get 5 stars and 22.5% get 4 stars). The Overall Morningstar RatingTM is derived from a weighted average of the performance figures associated with a fund’s 3, 5, and 10 year (if applicable) Morningstar RatingTM metrics.

 

Investment, Product and Distribution Capabilities

 

We were pleased with execution on our strategic initiatives across investment capabilities, products, distribution, and technology, including creating operational efficiency gains. Highlights from the year include:

 

We increased our global investment professional staff nearly 10% in 2020 to 724, and announced our plan to establish T. Rowe Price Investment Management, a separate SEC-registered investment advisor, to support the firm’s continued focus on generating strong investment results for clients.

 

We advanced our corporate access, ESG and equity data insight capabilities.

 

Expanded the firm’s product strategy with the launch of four active ETFs, our first sustainable funds range, and two new Japanese Investment Trust Management Companies.

 

Successfully navigated shift to virtual client engagement model as a result of the coronavirus pandemic.

 

We expanded our derivatives coverage and enhanced our complex product support model.

 

Enterprise Capabilities and Talent

 

We made progress toward our long-tern plan to make our operating and technology platforms more secure, efficient, and scalable.

 

We maintained compliance with significant regulations that had broad reaching impact on the firm’s operations.

 

We announced a new headquarters location.

 

Successfully navigated pandemic crisis including managing remote working arrangements for 97% of our associates, and communications to our global work force to ensure coordination of our response.

 

Advanced diversity and inclusion efforts and the creation of the Black Leadership Council and the MOSAIC Heritage Communities.

 

We welcomed Stephon Jackson and Justin Thomson, to the Management Committee, effective January 1, 2021.

 

36T. Rowe Price Group

 

2020 Compensation Decisions for our Chief Executive Officer and Other NEOs

 

Fixed base salary is a small part of overall compensation, with performance-based pay, in annual cash incentives and long-term equity awards, representing the substantial majority of compensation. The compensation mix awarded this year to our CEO and other NEOs, as illustrated below, reflects our performance-based compensation philosophy.

 

 

 

For 2020, Mr. Stromberg’s total compensation increased 5.1% over the prior year, which is driven by an increase in both the value of his annual bonus and long-term equity award. The higher total compensation reflects the Compensation Committee’s assessment of Mr. Stromberg’s overall performance as CEO and aligns with the Company’s achievement of financial and strategic results previously discussed. Consideration was also given to Mr. Stromberg’s pay relative to his industry peers.

 

Annual compensation for our other NEO’s also increased in 2020, consistent with Company performance and results in each of the NEO’s areas of responsibility. For Ms. Dufétel, her total compensation increase of 21% in 2020 also reflects a competitive adjustment following significant expansion of her responsibilities since becoming CFO in 2018, in addition to the Compensation Committee’s assessment of her performance and contributions to our financial and strategic results. In addition to her role as our CFO and Treasurer, Ms. Dufétel has also assumed firm-wide responsibilities for risk management, enterprise change management, investment operations and strategic initiatives, and in 2021 she was appointed as the Company’s Chief Operating Officer, in addition to her duties as CFO and treasurer.

 

Our AICP is funded as a percentage of net operating income, and long-term equity awards to NEOs were split equally between performance-based RSUs subject to a three-year performance goal followed by two-year time based vesting, and time-based RSUs subject to a three-year vesting schedule.

 

2021 Proxy Statement37

 

Executive Compensation Practices

 

At the 2020 annual meeting of stockholders, our stockholders cast a non-binding advisory vote on the compensation of the NEOs. Nearly 96% of the shares voted approved the compensation paid to our NEOs. The Compensation Committee welcomed this feedback and considers this outcome supportive of our approach to executive compensation. The Compensation Committee continues to implement and maintain practices in our compensation programs and related areas that reflect responsible corporate governance practices. These include:

 

 

 
WHAT WE DO   WHAT WE DON’T DO

    Include all independent directors on the Compensation Committee.

 

    Impose stock ownership and retention requirements on our independent directors, NEOs, and other select members of senior management.

 

    Emphasize variable compensation, including long-term equity incentive compensation.

 

    Grant 50% of each NEOs long-term equity award value as performance- based RSUs, with a three-year objective performance goal and two additional years of time-based vesting.

 

    Impose double-trigger vesting on acceleration of awards granted under our 2020 Long-Term Incentive Plan (2020 Plan) in the event we are acquired or taken over by another company.

 

    Engage an independent compensation consultant who provides services only to the Board and provides no other services to the Company or its management.

 

    Use a comprehensive risk management program designed to identify, evaluate, and control risks and our compensation and stock ownership programs work within this risk management framework.

 

    Have a recoupment policy for both cash and equity incentive compensation in place for executive officers in the event of a material restatement of our financial results within three years of the original reporting.

    Allow executives or independent directors to short-sell the Company stock or hedge to offset a possible decrease in the market value of Company stock held by them.

 

    Enter into change-in-control agreements with any of our executive officers.

 

    Provide excise tax gross-ups.

 

    Pay dividends on unearned performance-based RSUs.

 

    Enter into broad-based employment agreements with our U.S.-based executive officers.

 

    Accelerate the vesting of equity awards on an executive officer’s retirement.

 

    Permit the repricing or exchange of equity awards in any scenario without stockholder approval.

 

    Sponsor any supplemental executive retirement plans or provide significant perquisites and other personal benefits to our executive officers.

 

 

 

Executive Compensation Philosophy and Objectives

 

Our NEO and overall compensation programs are designed to satisfy two core objectives:

 

attract and retain talented and highly skilled management professionals with deep experience in investments, business leadership and client service; and

 

maintain alignment of interests between our management professionals and our stockholders by focusing on long-term corporate performance and value creation, emphasizing appropriate enterprise risk-taking, reinforcing a “client-focused” and collaborative culture, and rewarding associates for the achievement of strategic goals.

 

We believe NEO compensation should be straight-forward, goal-oriented, longer-term focused, transparent, and consistent with stockholder interests. In addition, NEO compensation should be linked directly to our overall corporate performance, as well as to success in achieving long-term strategic goals.

 

38T. Rowe Price Group

 

Key Elements of 2020 NEO Compensation

 

Our compensation program consists primarily of three elements: base salary, annual cash incentives, and long-term equity awards. Most NEO compensation is performance-based, aligned to Company performance and to individual performance against goals. There is no pre-established mix between cash and non-cash compensation or between short-term and long-term awards. Instead, each year the Compensation Committee determines the appropriate level and mix of short-term and long-term awards for our NEOs to recognize annual performance and to encourage meeting our long-term strategic goals.

 

ELEMENT   KEY FEATURES   PURPOSE
Salary  

•  Fixed annual cash amount.

 

•  Salary paid to our most senior personnel in the U.S. has been capped at $350,000 since 2005.

 

•  Salaries for personnel outside the U.S. are also capped at comparable levels of local currency. 

  •  Represents a small component of total compensation, so that the substantial majority of NEO compensation is dependent on performance-based annual incentive compensation as well as long-term equity incentives.
Annual Incentive
Compensation
Plan (AICP)
 

•  Performance based and represents a material portion of the NEO’s total compensation.

 

•  Administered by the Compensation Committee.

 

•  The AICP is part of the Company’s overall bonus pool, in which nearly all employees participate.

 

•  The AICP sets an aggregate maximum bonus pool for NEOs based solely on Company financial performance in the current year. The Compensation Committee annually determines the maximum percentage of the total AICP pool that can be awarded to each NEO. This is a meaningful limit on the amount that can be awarded to each NEO that is tied to actual financial performance.

 

•  Actual bonus amounts for each NEO are based on the Company’s financial and operating performance relative to annual goals and objectives plus individual performance and contributions.

 

•  Actual bonus amounts for each NEO are typically lower than the maximum amount determined under the plan. 

 

•  Provides structure for incentive compensation and, coupled with the use of judgement by the Compensation Committee, aligns cash compensation of the NEOs and other senior management to the Company’s annual performance.

 

•  Rewards NEOs for achievement of annual Company goals and objectives our long-term strategy.

 

•  Provides competitive cash compensation to attract and retain diverse high-quality talent.

 

Long-Term
Equity Awards
 

•  Represents a significant portion of the NEO’s total compensation and are earned over five-years.

 

•  The grant value for each NEO is based on relative level of corporate management and functional responsibility, competitive assessment of similar roles within the marketplace, individual performance, and expected future long-term contributions.

 

•  For 2020, 50% of the long-term equity award for NEOs were in performance-based RSUs tied to the attainment of a three-year objective performance goal. A NEO can earn from 0-100% of the performance RSUs based on the Company’s operating margin relative to the average operating margin for peers over the same period. If the Company achieves the three-year objective performance goal for the period 2021 through 2023, these awards would vest 50% per year starting in December 2024.

 

•  The remaining 50% of the long-term equity award for NEOs were in time-based RSUs that vest at a rate of 33 1/3% per year starting in December 2021.

 

•  Grants are awarded at the regularly scheduled December meeting of the Compensation Committee. 

 

•  Creates a strong link between NEO realized compensation and stock performance.

 

•  Provides a significant incentive to our NEOs and other senior management to protect and enhance stockholder value and profitability.

 

•  Enhances the link between compensation and long-term Company performance through the granting of performance- based RSUs.

 

•  Provides competitive compensation to attract and retain diverse high-quality talent.

 

 

2021 Proxy Statement39

 

Annual Incentive Compensation Plan Bonus Pool

 

The AICP provides that, unless approved by the Compensation Committee otherwise, the maximum bonus pool is equal to 5% of the Company’s net operating income adjusted to exclude, if any, (i) the effects of goodwill impairment, (ii) the cumulative effect of changes in accounting policies or principles, (iii) gains or losses from discontinued operations, and (iv) unusual or nonrecurring gains, losses, or expenses. The Compensation Committee also established maximum individual bonuses as a percentage of the AICP formula, however, they retained the right to award an amount that was less than each NEO’s maximum. The amounts awarded under the AICP are part of the Company’s annual bonus program.

 

The Company’s annual bonus program, under which nearly all of the employees of the Company are eligible to participate, is managed by the Compensation Committee and Management Compensation and Development Committee and is funded based on the Company’s financial results. Additional considerations include the Company’s investment performance, service quality for clients and progress toward stated objectives relating to the Company’s long-term strategies.

 

Compensation Committee’s Use of Judgment in Incentive Compensation

 

The Compensation Committee believes that judgment and thoughtful consideration of qualitative performance is a critical feature of the Company’s executive compensation program. While the Compensation Committee uses financial and other metrics to evaluate the performance of our senior executives, our business is dynamic and requires us to respond rapidly to changes in market conditions and other factors outside our control that impact our financial performance. The Compensation Committee believes that a rigid, formulaic program based strictly on quantitative metrics could have unintended consequences, such as encouraging executives to place undue focus on achieving specific shorter-term results at the expense of longer-term success of the company. In addition, solely formulaic compensation would not permit adjustments based on factors beyond the control of our executives as well as relative performance in relation to shifting market conditions and less quantifiable factors such as recognition of strategic developments and individual achievements. Therefore, thoughtful consideration of these additional factors allows the Compensation Committee to fully consider the overall performance of our executives over time, and has been a key ingredient in ensuring the Company’s positive long-term financial results.

 

Long-Term Equity Awards

 

We believe our long-term equity award program is a significant factor in maintaining a strong correlation between the compensation of our top managers and professionals, including our NEOs, and the long-term interests of our clients and stockholders. Our approach to long-term equity compensation has incorporated different award vehicles (e.g., stock options, restricted stock, or RSUs) and has varied over time. Currently we use RSUs and, in the case of our NEOs, we split the RSUs equally between performance-based RSUs and time-based RSUs. The mix of time-based and performance-based RSUs emphasizes long-term stockholder alignment for our NEOs.

 

The performance-based RSUs awarded to our NEOs are subject to a three-year performance period that begins on January 1st of the year following the grant and ends on December 31st of the third year following the grant. The performance goal for the performance-based RSUs is the Company’s operating margin relative to peers. The number of performance-based RSUs earned, if any, will be determined by comparing the Company’s operating margin to the average operating margin of a peer group of companies for the same period. Any performance-based RSUs earned after the three-year performance period will vest in equal annual installments beginning in December of the year following the end of the performance period (years four and five after the grant). The time-based RSUs awarded to our NEOs vest in equal annual installments over three years beginning in December in the year following the grant.

 

The individual equity award is a reflection of the long-term value added by the individual as well as their potential for future contributions. The total award granted to an NEO from year to year reflects individual performance and an assessment of the NEO’s relevant compensation positioning versus market peers in similar roles. The ultimate value realized from an equity award fluctuates with the Company’s stock price, thus aligning NEO pay with stockholder interests.

 

2020 Compensation Decisions

 

Given our shared and collaborative leadership structure, when setting the compensation in 2020, the Compensation Committee considered the collective contribution of the NEOs to the Company’s strategic imperatives as highlighted in the executive summary to this CD&A as well as their contributions to the related annual goals described below. The Compensation Committee considered each NEO’s individual contributions to the achievement of these and longer-term goals and the NEO’s individual performance in their functional responsibilities. These broader goals included overall Company financial results, investment performance and progress on product goals, net flows and progress on distribution goals, major program execution and progress on shared services goals, and governance and talent development. The Compensation Committee also looked to maintain reasonable alignment between the compensation of the NEOs and other senior personnel in order to retain talent and maintain an internally consistent compensation environment.

 

40T. Rowe Price Group

 

In keeping with the Company’s commitment to pay for performance, the maximum base salary of $350,000 for NEOs in the U.S., has remained unchanged since 2005 and is consistent with the base salaries paid to our most senior personnel. The Compensation Committee did not make any changes to base salaries for the NEOs in 2020.

 

Incentive Compensation

 

At the end of 2019, the Board approved senior management goals for 2020, which the Compensation Committee then used for evaluation of NEO performance at the end of the year. These goals were designed to promote a team-oriented structure that operates in the best long-term interests of clients, associates, and stockholders. Long-term goals that apply every year include the objective to recruit, develop, and retain diverse associates of the highest quality while creating an environment of collaboration and appropriately rewarding individual achievements and initiatives. This focus on our associates is intended to create a combination of talent, culture, and processes that will allow us to achieve superior investment results, market our products effectively, and deliver outstanding service on a global basis.

 

When evaluating performance and determining incentive compensation awards for our NEOs, the Compensation Committee considers both annual and longer-term results against these goals in order to reinforce our long-term management philosophy.

 

Specific goals established for 2020 consisted of the following:

 

Investment Performance and Capabilities   Product Capabilities
     

•     Sustain strong overall investment results and competitiveness of our investment strategies.

 

•     Grow investment management talent and leadership and extend investment capabilities.

 

•     Evolve global investment management and trading operating processes and systems to meet growing complexity.

 

  •     Maintain and support a strong product range that meets evolving client needs through vehicle choices, pricing strategy, seed management, insightful content, long-term product roadmaps and consistent health checks.
Net Flows and Distribution Capabilities   Shared Services and Talent
     

•     Deliver on distribution performance targets for gross sales, net flows, diversification and operating/efficiency metrics.

 

•     Enhance sales, client service, and marketing capabilities across intermediary, institutional and U.S. direct channels in support of our clients and to position the firm for long-term growth, diversification and efficiency.

 

 

•     Modernize technology infrastructure and architecture across the firm to simplify our environment and reduce risk.

 

•     Build effective and efficient shared service capabilities to support the enterprise and ensure regulatory compliance.

 

•     Attract, develop, and retain a diverse and collaborative workforce.

 

   
Enterprise Strategy, Governance and Financial Results  
 

•     Ensure the right strategy, allocation of resources, oversight, and governance models are in place to execute.

 

•     Manage our financial performance and position to protect/benefit our clients, associates, and stockholders, balancing short-term results with longer-term investment.

 

 

2021 Proxy Statement41

 

Individual Performance Considerations

 

In addition to contributions to the 2020 priorities summarized above, and the Company’s financial and strategic performance highlighted in the executive summary on page 33, the Compensation Committee considered the following individual contributions when setting 2020 compensation for our NEOs.

 

William J. Stromberg

 

Chair and Chief Executive Officer

 

ROLE CONSIDERATIONS

 

     Leadership, responsibility, and performance as Chair, President and CEO and chair of our Management Committee and Management Compensation and Development Committee.

 

INDIVIDUAL ACHIEVEMENTS

 

     Clear leader for the delivery of the firm’s strategic plan; driver of important change throughout the firm while preserving a collaborative and client-centered culture.

 

     Led firm’s response to the pandemic, including transition to work from home, putting associate safety first. Also led successful shift to a virtual annual stockholders’ meeting and virtual Board meetings.

 

     Integrated new head of Global Human Resources.

 

     Committed to the development of T. Rowe Price Investment Management (TRPIM) and acted as a senior advisor to its leadership team. Added TRPIM CEO Stephon Jackson to the Management Committee effective January 1, 2021.

 

     Continued progress on diversity & inclusion strategy, including formation of the Black Leadership Council, a team of senior leaders that will advise the Management Committee on diversity matters and also guided firm’s response to racial injustice issues.

 

     Overall investment performance remained strong for five-, and 10-year periods against active peers and was solid against benchmarks.

 

     Revenues grew 10.5%, diluted non-GAAP earnings per share increased 18.7%, and dividends per share rose 18.4%. Return on equity was consistent with 2019 at a healthy 32% for 2020.

 

     The Company returned $2.0 billion to stockholders in 2020 through dividends and active opportunistic share repurchases during the pandemic-induced bear market, while maintaining a very strong balance sheet.

 

 

42        T. Rowe Price Group 

 

Céline S. Dufétel  

 

Chief Operating Officer, Chief Financial Officer and Treasurer

 

ROLE CONSIDERATIONS

 

     Leadership, responsibility and performance as CFO and Treasurer, and chair of the Risk and Operational Steering Committee. Expanded role and responsibilities in 2020 to include leadership of global investment operations and enterprise change management in addition to existing responsibilities for risk management and strategic initiatives. Responsibilities expanded again in 2021 when she was appointed as the Company’s Chief Operating Officer.

 

INDIVIDUAL ACHIEVEMENTS

 

     Led quarterly reviews of each business unit with a keen focus on critical success metrics; oversaw deep-dive strategic reviews of key business units and important strategic initiatives, including two business transformation and several growth revitalization initiatives across the firm.

 

     As chair of the Risk and Operational Steering Committee, strengthened oversight of the firm’s change agenda and led reviews of audit, risk, cyber, compliance and operations; improved accountability and execution focus across the firm.

 

     Continued enhancing strategic planning and approach to evaluation of opportunities, including the acquisition and integration of $1.2 billion of stable value assets from PNC.

 

     Further strengthened the talent across the CFO Group while improving diversity; integrated new leaders of Global Investment Operations, Enterprise Change Office and Procurement functions.

 

     Key contributor on Management and Management Compensation and Development Committees and on a variety of steering committees, including the Investment Management, Product Strategy, Service Agreement Oversight Committees. Serves an integral role at Price Group board meetings.

 

     As owner of the business continuity function, worked with head of Global Human Resources and CEO to lead the firm’s pandemic response, preparing our facilities, and communicating to associates.

 

     Managed multi-year evaluation of sites for corporate headquarters, culminating in signing letter of intent to construct a new headquarters complex to be ready in 2024.

 

     Advanced stockholder engagement efforts and maintained strong relationships with the analyst community in both the U.S. and Europe. 

 

2021 Proxy Statement         43

 

Robert W. Sharps  

 

President, Head of Investments, and Group Chief Investment Officer

 

ROLE CONSIDERATIONS

 

     Leadership, responsibility, and performance as Head of Investments (including global trading), Group Chief Investment Officer, and chair of the Investment Management Steering Committee. In 2021, the Board appointed Mr. Sharps as the Company’s President.

 

INDIVIDUAL ACHIEVEMENTS

 

     Strong investment performance over five- and 10-years against active peers, particularly across multi-asset, with further broadening of the investment teams and their capabilities.

 

     Committed to and advised on the development of our new investment management subsidiary, TRPIM, including selection of leadership team. Recruited and onboarded the leader of our ETF business and oversaw the planning and launch of our active ETF product. Oversaw successful leadership transition for International Equity.

 

     Oversaw ESG function and its broad integration within Investments with outstanding ratings from industry services. Launched our first Responsible portfolios and prepared to launch first Impact strategy.

 

     Outstanding work as chair of the Investment Management Steering Committee, which focuses on long term product evolution at the firm. Oversaw significant number of new product launches across Investments. Key thought leader on investment pricing decisions across the firm.

 

     Led the five-person chief investment officer group that continues to represent our investment divisions with distinction. Co-chaired the firm’s Asset Allocation Committee with successful market shifts during the pandemic-driven bear market in the first quarter.

 

     Served as executive sponsor of our Black Leadership Council. Also served as a director of the Price funds’ board and as integral presenter at Price Group board meetings.

 

     Key contributor on the Management, Management Compensation and Development and Product Strategy Committees. Serves in an important leadership role on the U.S. Equity, International Equity, and Fixed Income Steering Committees. 

 

Christopher D. Alderson

 

Co-Head of Global Equity

 

ROLE CONSIDERATIONS

 

     Leadership, responsibility, and performance as Co-Head of Global Equity, Head of International Equity, and chair of the International Equity Steering Committee.

 

INDIVIDUAL ACHIEVEMENTS

 

     Investment performance for international equity remained strong over three-, five-, and 10-years against active peers and against benchmarks.

 

     Effective chair of the International Equity Steering Committee. Central leadership role in developing the talent and culture of the team to deliver the division’s excellent results at increasing scale; executed an effective transition of leadership responsibilities to next head of International Equity, Justin Thomson.

 

     Partnered successfully with Product team to progress the three-year product road map for International Equity. Successful launch of China Innovation Equity and planned 2021 launches of China Growth, Global Impact, Global Select, and UK Responsible Equity.

 

     Key contributor on the Management, Management Compensation and Development Investment Management Steering, and Product Strategy Committees.

 

     Led the firm’s initiative to establish an office in Shanghai, China, which opened in 2021. 

 

44         T. Rowe Price Group 

 

Eric L. Veiel  

 

Co-Head of Global Equity

 

ROLE CONSIDERATIONS

 

     Leadership, responsibility, and performance as Co-Head of Global Equity, Head of U.S. Equity, and chair of the U.S. Equity Steering Committee.

 

INDIVIDUAL ACHIEVEMENTS

 

     Investment performance for U.S. equity remained strong across the five- and 10-years against peers and solid against benchmarks.

 

     Chaired the U.S. Equity Steering Committee, which oversees our largest investment division. Developed several new leaders that are taking on additional responsibilities. Significantly enhanced diversity programs to access and develop diverse talent within Equity. Served as executive sponsor of WAVE, our business resource group for women.

 

     Advocated for and led day-to-day development of new investment management subsidiary, TRPIM, to be launched in the second quarter of 2022; work included development of organizational structure and operating plans, appointment of leadership team, recruitment and appointment of investment staff.

 

     Continued progress on integration of ESG into investment process and collaborated on development of Global Impact and Global Select equity strategies.

 

     Led the design and implementation of the plan to pay for third-party investment research in the U.S. and consulted on international implementation.

 

     Hired new head of Quantitative Investing and successfully onboarded and integrated him during the pandemic.

 

     Key contributor on the Management, Investment Management Steering, Multi-Asset Steering, and Product Strategy Committees. 

 

Annual Incentive Compensation

 

At the beginning of the year, the Compensation Committee established each NEO’s maximum payout percentage from the AICP bonus pool. The established payout percentages reflect the Compensation Committee’s decision to impose a financially based limit on the maximum payout to each NEO and the Compensation Committee’s expectation of each NEO’s relative contribution to the Company’s performance. The Compensation Committee has the discretion to reduce or eliminate the share of the bonus pool payable to any NEO.

 

The table below sets forth the maximum payout (in millions) allocated to our NEOs and the actual bonus awards (in millions) made by the Compensation Committee to our NEOs for 2020 and 2019.

 

NAME   2020
MAXIMUM
PAYOUT
BASED ON THE
TOTAL POOL
  2020
ANNUAL
INCENTIVE
PAYMENT
  2019
ANNUAL
INCENTIVE
PAYMENT
  2020
PAYMENT
PERCENTAGE CHANGE
OVER 2019
William J. Stromberg   $16.5   $9.0   $8.5   5.9%
Céline S. Dufétel   $  8.2   $4.5   $3.6   25.4%
Robert W. Sharps   $16.5   $9.0   $8.7   3.4%
Christopher D. Alderson1   $13.7   $7.3   $7.1   2.4%
Eric L. Veiel   $13.7   $7.4   $7.0   5.0%

 

1Bonus amounts received in 2020 and 2019 by Mr. Alderson were HKD 56.8 million and HKD 57.8 million, respectively.

 

Consistent with past practice, the Compensation Committee exercised negative discretion and awarded less than the maximum payout amount to the NEOs. Exercising such negative discretion maintains alignment between the bonus amounts paid to the NEOs and the expected range of bonuses paid to peers with similar roles at our competitors. The significant increase in the annual incentive payment for Ms. Dufétel from 2019 to 2020 is a reflection of both her very strong performance as the CFO and Treasurer and her significantly expanded roles and responsibilities in 2020 as described above. The Compensation Committee has the power to authorize additional incentive compensation or bonuses outside the AICP but did not do so in 2020.

 

2021 Proxy Statement        45

 

Long-Term Equity Awards

 

Pursuant to our long-term equity award program award values are split equally in the form of performance-based RSUs and time-based RSUs to our NEOs. Each long-term equity award value was converted to units using the closing stock price of our common stock on the date of grant ($153.17 for 2020). The NEOs were granted the following long-term incentive values (in millions) and resulting mix of performance-based and time-based RSUs in 2020.

 

NAME   2020
EQUITY
INCENTIVE
VALUE
  2020
PERFORMANCE-
BASED
RESTRICTED
STOCK UNITS
  2020 TIME-
BASED
RESTRICTED
STOCK
UNITS1
  2019 EQUITY
INCENTIVE
VALUE
  2020 LTI
AWARD
VALUE
CHANGE
OVER 2019
William J. Stromberg   $5.9   19,260   19,260   $5.7   4.4%
Céline S. Dufétel   $2.5   8,161   8,161   $2.1   19.0%
Robert W. Sharps   $5.6   18,118   18,118   $5.0   12.1%
Christopher D. Alderson   $2.5   8,161   8,161   $2.5   —%
Eric L. Veiel   $3.5   11,426   11,426   $3.2   11.1%
                     
1Time-based RSU’s vest in equal installments over the three years beginning in December in the year after the grant date.

 

Performance-Based RSUs—Performance Thresholds and Vesting

 

The performance thresholds established by the Compensation Committee for the performance-based RSUs granted in 2020 to our NEOs were based on the Company’s operating margin for the three-year performance period compared with the average operating margin of a designated group of public company peers (Industry Average Margin) that was composed of:

 

Affiliated Managers Group, Inc. Janus Henderson Group Invesco Ltd.
AllianceBernstein L.P. Federated Investors  
BlackRock, Inc. Franklin Resources  

 

The peer group listed above is a subset of the peer group used in evaluating the competitive positioning of our compensation program. The Compensation Committee selected operating margin as the sole performance metric because it is a key indicator of profitability and relative financial performance in the asset management industry. Operating margin is determined by dividing net operating income by total revenues for the performance period, as reported in the consolidated financial statements filed with the SEC or, if such financial statements are not available for a peer company at the time of determination, as otherwise disclosed in a press release by such peer company. In each case, net operating income is adjusted to exclude the effects of goodwill impairment, the cumulative effect of changes in accounting policies or principles, and gains or losses from discontinued operations, as each is reflected on the face of or in the notes to the relevant financial statements. For performance-based RSUs awards made in 2020, the number of RSU’s earned will be determined by comparing the Company’s operating margin for the three-year performance period to the average operating margin of the peer group of companies for the same period, and thereafter vest over the following two years (years four and five after the grant date).

 

The following table sets forth the performance thresholds and related percentage of RSUs eligible to be earned that were established by the Compensation Committee for the 2020 awards.

 

TROW Operating Margin as Percent of Industry Average Margin   >=100%   90%-99%   80%-89%   70%-79%   60%-69%   50%-59%   <50%
Amount of Restricted Stock Units Eligible to be Earned   100%   90%   80%   70%   60%   50%   0%

 

GRANT DATE

  

PERFORMANCE PERIOD   TROW OPERATING
MARGIN AS PERCENT
OF INDUSTRY
AVERAGE MARGIN
  AMOUNT EARNED
AND SUBJECT
TO STANDARD
VESTING SCHEDULE
  VESTING START
MONTH/YEAR
December 2020   January 1, 2021 to December 31, 2023   Not determinable at this time   December 2024

 

Performance-based RSUs earned by each NEO following the completion of the relevant performance period vest at a rate of 50% per year beginning in the month and year specified in the chart above once the Compensation Committee certifies the number of RSUs earned.

 

46         T. Rowe Price Group 

 

Process for Determining Executive Compensation

 

The Compensation Committee has established a comprehensive process for:

 

reviewing our executive compensation program designs to ensure that they are aligned to our philosophy and objectives,

 

evaluating performance by our NEOs against goals and objectives established or reviewed by the Compensation Committee, and

 

setting compensation for the NEOs and other senior executives.

 

The table below summarizes the actions taken by the Compensation Committee throughout 2020.

 

 

 

2021 Proxy Statement         47 

 

Delegation Authority

 

The Compensation Committee has delegated compensation decisions regarding nonexecutive officers, including the establishment of specific salary and incentive compensation levels and certain matters relating to stock-based compensation, to the Management Compensation and Development Committee, a committee comprised of members of the Management Committee.

 

Committee Procedures

 

Early each year, the Compensation Committee meets with the President and CEO and members of senior management in order to discuss goals and objectives for the coming year, including goals and objectives applicable to the NEOs listed in our Summary Compensation Table. In addition, the Compensation Committee determines eligibility for the AICP bonus pool and sets forth the maximum percentage that may be paid to each participant. At its meeting in December, the Compensation Committee evaluates executive performance during the year as part of its determination of appropriate incentive compensation awards.

 

The Compensation Committee awards annual equity incentive grants to employees from stockholder-approved long-term incentive plans as part of the Company’s annual compensation program.

 

Role of Executive Officers

 

The Compensation Committee solicits input from the President and CEO and the Management Compensation and Development Committee regarding general compensation policies, including the appropriate level and mix of compensation. The Compensation Committee also consults with the President and CEO regarding the appropriate bonus and salary levels for other executive officers.

 

Role of Independent Compensation Consultant

 

Johnson Associates served as the Compensation Committee’s independent compensation consultant in 2020 and attended all Compensation Committee meetings during the year, and regularly meets with the Compensation Committee in executive session. The Compensation Committee benefited from the consultant’s broad experience in advising other compensation committees, in-depth understanding of investor perspectives on compensation, and familiarity with our compensation programs and policies and those of peer companies in the asset management and financial services industry.

 

Johnson Associates provides the Compensation Committee with information about the competitive market for senior management in the investment management and financial services industries and compensation trends across industries. Specifically in 2020, Johnson Associates reviewed, evaluated and recommended changes to the competitive market peer group to be used in evaluating NEO compensation, and periodically advised the Compensation Committee on trends and projected implications on executive compensation practices in response to the global pandemic. The consultant also provided competitive guidance to the Compensation Committee regarding 2020 incentive compensation decisions for the President and CEO, and for the other NEOs.

 

Johnson Associates has no relationship with Price Group other than as the Board’s compensation consultant. Johnson Associates has not provided any services to the Company other than those provided to the Compensation Committee in their role as independent consultant. The Compensation Committee has assessed the independence of Johnson Associates pursuant to SEC rules and concluded that the work performed by the advisor does not raise any conflicts of interest. The Compensation Committee will continue to periodically review its relationship with Johnson Associates and their continued appointment as the Compensation Committee’s independent consultant.

 

Many of our key competitors are not publicly traded or are subsidiaries of larger companies. These competitors generally do not publicly disclose the compensation data of their top executive officers. During the year, Johnson Associates presented a report of expected competitive pay for each NEO based on current industry trends and their market evaluation of each NEO’s role. This data, along with competitive market data provided to management by McLagan Partners (McLagan) and input from the CEO and other senior executive officers of the Company, provided guidance to the Compensation Committee in their compensation decisions for each NEO for 2020.

 

McLagan has an extensive database on compensation for most investment management companies, including private companies for which information is not otherwise generally available. McLagan summarizes data by role across multiple companies without specifically identifying information for a particular company. Management uses the summary information from McLagan for a reasonable estimation of compensation levels in the industry for persons with specific roles relevant to our business (e.g., portfolio manager, analyst, client service manager, etc.). Relevant portions of this information are shared by executive management with the Compensation Committee. McLagan works with management and does not act as a compensation consultant to the Compensation Committee.

 

48        T. Rowe Price Group 

 

Competitive Positioning

 

The Compensation Committee annually reviews competitive data regarding compensation at peer companies in the investment management industry with their independent compensation consultant and management. We do not set compensation levels to fall within specific ranges compared with benchmark data. Instead, we use the information provided by Johnson Associates, proxy data for peer group companies listed below, and survey data provided by McLagan and others about the competitive market for senior management to gain a general understanding of current compensation practices and to assist in the development of compensation programs and setting compensation levels for our senior executives.

 

In 2020, the Compensation Committee asked Johnson Associates, in partnership with management, to review and assess the existing compensation peer group and, if warranted propose potential changes. The assessment was conducted in an effort to better reflect our size, complexity of offerings, scope of domestic and global capabilities, and diversified client base (retail and institutional), and the evolving competitive landscape, including the merger of several of former peer group comparators. Based on the review Johnson Associates suggested that for 2020 TIAA be added to the peer group for all executives, and that J.P. Morgan Asset Management, Morgan Stanley Asset Management and Goldman Sachs Asset Management, be included with the other firms when considering a peer group for the CEO. Below is the list of the final 2020 peer group recommended by Johnson Associates and approved by the Compensation Committee:

 

  Affiliated Managers Group, Inc. 

 AllianceBernstein L.P. 

 Ameriprise Financial, Inc.

 

 BlackRock Inc. 

 Charles Schwab Corporation 

 Eaton Vance Corp.

 

  Franklin Resources 

 Invesco Ltd. 

 Northern Trust 

 TIAA 

 CEO Only: 

 J.P. Morgan Asset Management 

 Morgan Stanley Asset Management 

 Goldman Sachs Asset Management 

 

 

The companies making up the peer group listed above were selected because they are public asset managers, as well as comparable financial services and brokerage companies given their assets and scale, or in the case of the CEO Only firms listed above, because they are significant asset management subsidiaries of publicly-traded firms with significant AUM. The Compensation Committee will continue to review the composition of this peer group to analyze our executive compensation program and determine whether any changes should be made in the future. In addition to specific information on these companies, the Compensation Committee reviewed aggregated summary compensation data based on information from surveys that include some of the peer companies listed above as well as other public and nonpublic companies with which we compete for executive talent, including the Capital Group Companies Inc., Fidelity Investments, Goldman Sachs Asset Management, Janus Henderson Investors, J.P. Morgan Asset Management, MFS Investment Management, Pacific Investment Management Company LLC, The Vanguard Group Inc., Wellington Management Company LLP, and Western Asset Management Co.

 

In light of our overall performance in 2020, the Compensation Committee believes that the compensation paid to our CEO and other NEOs is reasonable in relation to the compensation paid by our peer companies both on an absolute basis and in comparison to relevant financial performance metrics.

 

Risk Management and the Alignment of Management with our Stockholders

 

The Compensation Committee considers whether the executive compensation program rewards reasonable risk-taking and if incentive opportunities achieve the proper balance between rewarding employees and managing risk and protecting stockholder returns. While the design of our executive compensation program is primarily performance-based, we believe that it does not encourage inappropriate risk-taking. Ongoing and active discussions with management regarding progress on short-term and long-term goals enables informed decisions while avoiding the risks that can be associated with managing short-term results to achieve predetermined formulaic outcomes.

 

Our compensation programs are designed to provide executive officers with appropriate incentives to create long-term value for stockholders while taking thoughtful and prudent risks to grow value over time. We believe that our equity program, our stock ownership guidelines, and the very significant stock ownership of our most tenured NEOs create important links between the financial interests of our executives and long-term performance and mitigate any incentive to disregard risks in return for potential short-term gains. In addition, we have a robust risk management program designed to identify, evaluate, and control risks. Through this program, we take a company-wide view of risks and have a network of systems and oversight to ensure that risks are not viewed in isolation and are appropriately controlled and reported, including a system of reporting to the chief executive officer, the Audit Committee, and the full Board. We believe that our compensation and stock ownership programs work effectively within this risk management program.

 

2021 Proxy Statement          49

 

Other Compensation Policies and Practices

 

Defined Contribution Plan

 

Our U.S. retirement program provides retirement benefits based on participant elective deferrals, Company contributions, and the investment performance of each participant’s account. For 2020, we contributed $150,000 to this program for our U.S.-based NEOs as a group. We provide this program to all U.S. employees in order to assist them in their retirement planning. The contribution amounts are based on plan formulas that apply to all employees. Since relocating to our Hong Kong office in early 2020, Mr. Alderson participates in the mandatory retirement benefit program offered to all associates in Hong Kong. For 2020, we contributed $34,811 to this program on his behalf.

 

Perquisites and Other Personal Benefits

 

We do not provide significant perquisites and other personal benefits to our executive officers. We make programs related to executive health benefits and parking available to all senior officers. We also cover certain costs associated with the NEOs’ spouses’ participation in events held in connection with the annual joint Price Group and Price funds’ boards of directors meeting as well as other Board and business-related functions. Mr. Alderson also receives, along with other senior personnel outside the U.S., a minor travel insurance allowance.

 

Supplemental Savings Plan

 

For 2020, the Supplemental Savings Plan provided certain senior officers the opportunity to defer receipt of a portion their cash incentive compensation earned for a year during which services are provided. The amounts deferred are adjusted in accordance with the hypothetical investments chosen by the officer from the list of products offered under our U.S. retirement program. Any amounts so deferred must be deferred for a period of at least two years but may be deferred for a longer period or until termination of employment. Distributions from the Supplemental Savings Plan are made in a lump-sum payment upon termination or as installment payments for up to 15 years. For 2020, no NEO elected to have a portion of their AICP payout deferred. See our Nonqualified Deferred Compensation Table on page 57 for more information.

 

In 2020, the Supplemental Savings Plan was amended, with the changes beginning with deferrals of 2021 compensation. The changes include reducing limits on the maximum permitted deferral to be the lesser of 50% of cash incentive compensation, or $2 million, increasing the minimum deferral period to at least five years, reducing the maximum number of installment payments to 10-years, and to provide for an automatic lump-sum payment upon termination prior to age 58.

 

Post-Employment Payments

 

We have not entered into severance or other post-employment agreements with any of our NEOs. Consequently, we generally do not have any commitments to make post-employment payments to them. All agreements for stock option and stock awards granted to employees from our equity plans prior to February 2012 include provisions that may accelerate the vesting of outstanding equity awards upon the grantee’s death or in connection with a change in control of Price Group or, at the administrator’s discretion, upon disability of the grantee. We changed these acceleration provisions for stock options and stock awards granted on and after February 23, 2012, in the following ways: (1) aligned the treatment of the awards in the event of a grantee’s death or termination of employment due to total disability so that vesting acceleration will occur in both events; and (2) provided for “double-trigger” vesting acceleration in the event the equity incentive awards are not terminated as part of the change-in-control transaction. This means that in such a circumstance, accelerated vesting only occurs if, at the time of or within 18 months after the change-in-control transaction, a participant’s employment is terminated involuntarily without cause or the participant resigns with good reason (generally requiring a material diminution in authority or duties, material reduction in compensation, or relocation by a substantial distance). If the acquiring entity requires that we terminate outstanding equity incentive awards as part of the change-in-control transaction, vesting also will accelerate and award holders will be given an opportunity to exercise outstanding stock options before such termination. The Compensation Committee can modify or rescind these provisions or adopt other acceleration provisions. See our Potential Payments on Termination or Change in Control on page 58 for further details.

 

Recoupment Policy

 

Our Board has adopted a Policy for Recoupment of Incentive Compensation for executive officers of the Company. This policy provides that in the event of a determination of a need for a material restatement of the Company’s financial results within three years of the original reporting, the Board will review the facts and circumstances that led to the requirement for the restatement

 

50        T. Rowe Price Group  

 

and will take actions it deems necessary and appropriate. The Board will consider whether any executive officer received incentive compensation, including equity awards, based on the original financial statements that in fact was not warranted based on the restatement. The Board will also consider the accountability of any executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement. The actions the Board could elect to take against a particular executive officer include: the recoupment of all or part of any bonus or other incentive compensation paid to the executive officer, including recoupment in whole or in part of equity awards; disciplinary actions, up to and including termination; and/or the pursuit of other available remedies, at the Board’s discretion.

 

Stock Ownership Guidelines

 

We have a stock ownership policy covering our executive officers. This policy provides that our NEOs, our other executive officers, and the members of our Management Committee are expected to reach levels of ownership determined as a stated multiple of an executive’s base salary within five years from the date when the executive assumed his or her position. The stated ownership multiples are 10 times base salary for the Chair and CEO, five times base salary for members of our Management Committee, and three times base salary for the remaining executive officers. For purposes of the guidelines, unvested RSUs are counted in an officer’s total ownership, but unexercised stock options, both vested and unvested, are not counted. Once the officer reaches the ownership target, the number of shares needed to reach the level is expected to be retained. All of our NEOs, have satisfied the applicable stock ownership multiple.

 

Tax Deductibility of Compensation

 

Compensation in excess of $1.0 million paid to any NEO that is also a covered employee will not be deductible for tax purposes unless (i) it qualifies for transition relief applicable to a written binding contract that was in effect on November 2, 2017 and that was not materially modified after that date, or (ii) satisfies an exception under any other section of the Code to the limitation on deductibility under section 162(m).

 

While the Compensation Committee will continue to consider the tax deductibility of compensation as one of many factors, the Compensation Committee believes stockholder interests are best served by not restricting the Compensation Committee’s discretion and flexibility in structuring compensation programs to attract, retain, and motivate key executives, even though such programs may result in non-deductible compensation expense.

 

Accounting for Stock-Based Compensation

 

We account for stock-based compensation in accordance with generally accepted accounting principles. Pursuant to the guidance, stock-based compensation expense is measured on the grant date based on the fair value of the award. We recognize stock-based compensation expense ratably over the requisite service period of each award and we consider, in the case of performance-based restricted units, the probability of the performance thresholds being met.

 

Report of the Executive Compensation and Management Development Committee

 

As part of our responsibilities, we have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which begins on page 33 of this proxy statement. Based on such review and discussions, we have recommended to the Board the inclusion of the Compensation Discussion and Analysis in this proxy statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

 

Robert F. MacLellan, Chair
Mark S. Bartlett
Mary K. Bush
Dina Dublon
Dr. Freeman A. Hrabowski, III
Olympia J. Snowe
Robert J. Stevens
Richard R. Verma
Sandra S. Wijnberg
Alan D. Wilson

 

2021 Proxy Statement           51

 

 

Executive Compensation Tables

 

Summary Compensation Table1

 

The following table summarizes the total compensation of our NEOs, who are the chief executive officer, the chief financial officer, and our three other most highly compensated executive officers.

 

                         
               NON-EQUITY         
           STOCK   INCENTIVE PLAN   ALL OTHER     
NAME AND PRINCIPAL POSITION  YEAR   SALARY   AWARDS3   COMPENSATION4   COMPENSATION5   TOTAL 
William J. Stromberg   2020   $350,000   $5,900,108   $9,000,000   $87,166   $15,337,274 
Chair and Chief   2019   $350,000   $5,650,073   $8,500,000   $88,273   $14,588,346 
Executive Officer   2018   $350,000   $4,450,019   $8,200,000   $86,734   $13,086,753 
Céline S. Dufétel   2020   $350,000   $2,500,041   $4,450,000   $79,764   $7,379,805 
Chief Operating Officer, Chief Financial   2019   $350,000   $2,100,055   $3,550,000   $79,798   $6,079,853 
Officer and Treasurer   2018   $350,000   $1,200,071   $2,000,000   $204,718   $3,754,789 
Robert W. Sharps   2020   $350,000   $5,550,268   $9,000,000   $87,165   $14,987,433 
President, Head of Investments, and   2019   $350,000   $4,950,216   $8,700,000   $86,696   $14,086,912 
Group Chief Investment Officer   2018   $350,000   $4,100,029   $8,100,000   $85,670   $12,635,699 
Christopher D. Alderson2   2020   $348,100   $2,500,041   $7,316,800   $60,054   $10,224,995 
Co-Head of Global Equity   2019   $344,600   $2,500,111   $7,147,200   $48,769   $10,040,680 
    2018   $320,400   $2,450,023   $6,674,800   $54,973   $9,500,196 
Eric L. Veiel   2020   $350,000   $3,500,241   $7,350,000   $87,072   $11,287,313 
Co-Head of Global Equity   2019   $350,000   $3,150,203   $7,000,000   $86,449   $10,586,652 

 

1Includes only those columns relating to compensation awarded to, earned by, or paid to the NEOs in 2020, 2019, and 2018. All other columns have been omitted. Mr. Veiel became a named executive officer in 2019, therefore the amounts for 2018 have been omitted.

 

2Cash amounts received by Mr. Alderson pursuant to his employment agreement were paid in Hong Kong dollars (HKD) in 2020 and 2019 and British pounds (GBP) in 2018. In calculating the U.S. equivalent for amounts that are not denominated in U.S. dollars (USD), the Company converts each payment to Mr. Alderson into U.S. dollars based on an average daily exchange rate during the applicable year. The average exchange rate for 2020 was 1 HKD to 0.12893 USD; 2019 was 1 HKD to 0.12763 USD; and 2018 was 1 GBP to 1.33496 USD. Mr. Alderson’s cash compensation for each year in local currency was HKD 57,020,000 in 2020, HKD 58,700,000 in 2019 and £5,240,000 in 2018.

 

3Represents the full grant date fair value of performance-based RSUs granted. The fair value was computed using the market price per share of Price Group common stock on the date of grant multiplied by the target number of units, as this was considered the probable outcome. See the Grants of Plan-Based Awards Table for the target number of units for 2020.

 

4Represents cash amounts awarded by the Compensation Committee and paid to NEOs under the 2020 AICP. See our CD&A and the Grants of Plan-Based Awards Table for more details regarding the workings of this plan. These amounts include amounts elected to be deferred under the Supplemental Savings Plan. See the Nonqualified Deferred Compensation Table for further details.

 

5The following types of compensation are included in the “All Other Compensation” column for 2020:

 

                         
           MATCHING       PERQUISITES     
   CONTRIBUTIONS   RETIREMENT   CONTRIBUTIONS   MATCHING GIFTS   AND OTHER     
   TO RETIREMENT   PROGRAM   TO STOCK   TO CHARITABLE   PERSONAL     
NAME  PROGRAM   LIMIT BONUSa   PURCHASE PLANb   ORGANIZATIONSc   BENEFITSd   TOTAL 
William J. Stromberg  $37,500   $4,754   $4,000   $25,000   $15,912   $87,166 
Céline S. Dufétel  $37,500   $4,754   $   $25,000   $12,510   $79,764 
Robert W. Sharps  $37,500   $4,754   $4,000   $25,000   $15,911   $87,165 
Christopher D. Alderson  $34,811   $   $   $25,000   $243   $60,054 
Eric L. Veiel  $37,500   $4,754   $4,000   $25,000   $15,818   $87,072 

 

aCash compensation for the amount calculated under the U.S. retirement program that could not be credited to their retirement accounts in 2020 due to the contribution limits imposed under Section 415 of the Internal Revenue Code. Since relocating to our Hong Kong office in early 2019, Mr. Alderson participates in the mandatory retirement benefit program offered to all associates in Hong Kong. For 2020, we contributed $34,811 to this program on his behalf.

 

52T. Rowe Price Group

 

bMatching contributions paid under our Employee Stock Purchase Plan offered to all employees of Price Group and its subsidiaries.

 

cNEOs, directors, and all employees of Price Group and its subsidiaries are eligible to have personal gifts up to an annual limit to qualified charitable organizations matched by our sponsored T. Rowe Price Foundation, in the case of U.S. employees, and Price Group, in the case of employees outside the U.S. For 2020, all of the NEOs were eligible to have up to $25,000 matched.

 

dCosts incurred by Price Group under programs available to all senior officers, including the NEOs, for executive health benefits and parking, as well as certain costs covered by Price Group relating to spousal participation in events held in connection with the Price Group Board meetings.

 

2020 Grants of Plan-Based Awards Table1

 

The following table provides information concerning each plan-based award granted in 2020 to the executive officers named in the Summary Compensation Table and other information regarding their grants.

 

                 ESTIMATED     
         DATE OF   POSSIBLE PAYOUTS     
      COMPENSATION  ESTIMATED POSSIBLE   UNDER EQUITY     
      COMMITTEE  PAYOUTS UNDER NON-EQUITY   INCENTIVE     
      MEETING AT  INCENTIVE PLAN AWARDS2   PLAN AWARDS3   GRANT DATE 
      WHICH GRANT  THRESHOLD   MAXIMUM   TARGET   MAXIMUM   FAIR VALUE OF 
NAME  GRANT DATE  WAS APPROVED  ($)   ($)   (#)   (#)   STOCK AWARDS4 
William J. Stromberg  2/12/2020     $   $16,474,002                
   12/8/2020  12/7/2020             38,520    38,520   $5,900,108 
Céline S. Dufétel  2/12/2020     $   $8,237,001                
   12/8/2020  12/7/2020             16,322    16,322   $2,500,041 
Robert W. Sharps  2/12/2020     $   $16,474,002                
   12/8/2020  12/7/2020             36,236    36,236   $5,550,268 
Christopher D. Alderson  2/12/2020     $   $13,728,335                
   12/8/2020  12/7/2020             16,322    16,322   $2,500,041 
Eric L. Veiel  2/12/2020     $   $13,728,335                
   12/8/2020  12/7/2020             22,852    22,852   $3,500,241 

 

1Includes only those columns relating to plan-based awards granted during 2020. All other columns have been omitted.

 

2The maximum represents the highest possible amount that could have been paid to each of these individuals under the 2020 AICP based on our 2020 audited financial statements. The Compensation Committee has discretion to award no bonus under this program, or to award up to the maximum bonus. As a result, there is no minimum amount payable even if performance goals are met. For 2020, the Compensation Committee awarded less than the maximum amount to the NEOs and the actual amount awarded has been disclosed in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation.” See our CD&A for additional information regarding the AICP.

 

3Represents both time-based RSUs and performance-based RSUs granted as part of the Company’s annual equity incentive program from its 2020 Plan. The annual grant value awarded is equally split between time-based RSUs and performance-based RSUs. The time-based RSUs vesting occurs 33% on each of December 10, 2021, December 9, 2022, and December 8, 2023. The performance-based RSUs are subject to a performance-based vesting threshold with a three-year performance period, which for the December 2020 grant, will run from January 1, 2021 to December 31, 2023. For each performance-based RSU, the target payout represents the number of RSUs to be earned by the NEO if the Company’s operating margin for the performance period is at least 100% of the average operating margin of a designated peer group. The Company’s operating margin performance below this target threshold results in forfeiture of some or all of the performance-based RSUs. The performance-based RSUs earned by the NEO are then subject to time-based vesting, which occurs 50% on December 10, 2024 and December 10, 2025. These grant agreements include a provision that allows for the continued vesting of the grant, from the date of separation if certain age and service criteria are met for the U.S.-based NEOs and a service criteria is met for Mr. Alderson. Dividends on these performance-based RSUs are accrued during the performance period and are only paid on earned units. Additional information related to these performance-based RSUs, including a listing of companies in the designated peer group, are included in our CD&A.

 

4Represents the grant date fair value of the time-based RSUs and performance-based RSUs granted in 2020. The grant date fair value of the awards was measured using the market price per share of Price Group common stock on the date of grant multiplied by the target number of units noted in the table, as this was considered the probable outcome.

 

2021 Proxy Statement 53

 

 

 

Outstanding Equity Awards Table at December 31, 20201

 

The following table shows information concerning equity incentive awards outstanding at December 31, 2020, for each NEO. The grant agreements for all unexercisable option awards and unvested stock awards include a provision that allows for continued vesting for a period of 36 months from the date of separation for awards granted before 2017, and for the remaining unvested portion for awards granted in 2017, if certain age and service criteria are met for the U.S.-based NEOs and a service criteria is met for Mr. Alderson. In 2018, the provision that allows for continued vesting for all associates was modified for 2018 grants and thereafter to a tiered approach with three different age and service criteria, each having separate periods of continued vesting.

 

         OPTION AWARDS    STOCK AWARDS 
                                  EQUITY      
                            MARKET    INCENTIVE      
                        NUMBER   VALUE OF    PLAN   EQUITY 
                        OF SHARES   SHARES    AWARDS:   INCENTIVE 
         NUMBER OF              OR UNITS   OR UNITS    NUMBER OF   PLAN AWARDS: 
         SECURITIES              OF STOCK   OF STOCK    UNEARNED   MARKET VALUE 
         UNDERLYING              THAT   THAT    UNITS   OF UNEARNED 
         UNEXERCISED   OPTION    OPTION   HAVE NOT   HAVE NOT    THAT HAVE   UNITS THAT 
    GRANT    OPTIONS:   EXERCISE    EXPIRATION   VESTED   VESTED    NOT VESTED   HAVE NOT 
NAME   DATE    EXERCISABLE   PRICE    DATE    (#)   ($)2   (#)   VESTED ($)2 
William J. Stromberg   2/19/2015    1,235   $80.949    2/19/2025                     
    2/17/2016                   2,5623a  $387,8613a          
    9/8/2016                   2,6153b  $395,8853b          
    12/6/2017                   20,9263c  $3,167,9873c          
    12/11/2018                   38,6843d  $5,856,3713d          
    12/3/2019                   15,5925d  $2,360,4735d   23,3884a  $3,540,7094a
    12/8/2020                   19,2605e  $2,915,7715e   19,2604b  $2,915,7714b
Céline S. Dufétel   12/6/2017                   2,6533c  $401,6383c          
    12/11/2018