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

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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T. Rowe Price Group, Inc.
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Table of Contents

2020 NOTICE OF
ANNUAL MEETING AND
PROXY STATEMENT

 

May 12, 2020

Owings Mills, Maryland


 

 

Table of Contents

T. Rowe Price Group, Inc.

A premier global active asset manager

 

         
Founded in
1937
$1.2
TRILLION
in assets under
management(¹)
661
investment
professionals
worldwide
Local presence in
16
COUNTRIES
7,365
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 20 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, 2019.

 

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

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2019 Performance

 

Investment Results

 

As investors, we remained focused on our strategic investing approach and delivering alpha for clients through active management. In 2019 our investment teams performed well across most asset classes, with 75%, 80%, and 82% 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, 2019.(1)

 

Financial Results

 

Our assets under management (AUM) grew by 25% to $1.21 trillion on December 31, 2019, with about 7% of our AUM domiciled outside the U.S. Average AUM grew 7% to $1.11 trillion, which led to revenues of more than $5.6 billion, up 4.6% or $245 million versus 2018. Operating expenses on a GAAP basis increased 7.3% to $3.2 billion. Diluted earnings per share grew 19.7% to $8.70 per share and adjusted diluted earnings per share grew 12.9% to $8.07 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

 

As part of our commitment to our clients, associates, and communities, we prioritize reducing the impact that our buildings and operations have on the environment. We believe that the actions we take today in this regard return immediate results and will benefit future generations. Planning and preparing for a better future is aligned with the Company’s culture and core mission, and we continue to pursue multi-year strategies that target an achievable positive impact. Furthermore, we are holding ourselves accountable to make continued progress by setting reduction goals through 2025, specifically reducing greenhouse gas (GHG) emissions by 13% and landfill waste by 92% when compared with our performance in 2010, our benchmark year.

 

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 2019

 

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: © 2019 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.
 

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Notice of 2020 Annual Meeting of Stockholders

 

Date and Time
Tuesday, May 12, 2020
10 a.m. eastern time
   
Place
4435 Painters Mill Road,
Owings Mills,
Maryland 21117*
   
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., 2020 Annual Meeting of Stockholders.

 

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

 

*As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the Annual Meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be available at https://troweprice.gcs-web.com/
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 2020   FOR
4 Approve the 2020 Long-Term Incentive Plan   FOR
5 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, 2020, are entitled to attend and vote at the Annual Meeting or any adjournments.

 

By Order of the Board of Directors,

 

 

David Oestreicher

Chief Legal Counsel and Corporate Secretary

Baltimore, Maryland

March 25, 2020

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 12, 2020
 

This proxy statement and our 2019 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 in person must follow the instructions on page 77 under the section titled “Do I need to bring anything in order to attend the Annual Meeting?”


 

2020 Proxy Statement 1
 

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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 2020 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 2020
Approve the 2020 Long-Term Incentive Plan
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 2019 Annual Report to Stockholders containing our consolidated financial statements and other financial information for the year ended December 31, 2019, 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 25, 2020.

 

2 T. Rowe Price Group
 

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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 one to 10 years, with an average tenure of approximately five years

 

   Long-tenured directors in leadership roles

 

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

   The Board held six meetings in 2019

 

   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 each of the Board meetings in 2019

 

   All directors were at the 2019 annual meeting of stockholders in person and were available to meet with 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.  

 

 

2020 Proxy Statement 3


 

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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


 

Table of Contents

 

Proposal 3

 

Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2020

 

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

 

Approval of the 2020 Long-Term Incentive Plan

 

The 2020 Long-Term Incentive Plan will reserve 11,000,000 common shares of the Company available for issuance to our employees and other eligible participants.

 

Why We Support the Proposal

The 2020 Plan:

 

Is key to our attracting and retaining top talent
Enables us to align the long-term interests of our associates with those of our stockholders
Provides for the granting of performance-based awards to our NEOs and certain other senior executives
Continues our successful long-term equity compensation program
Includes terms that reflect our strong commitment to governance measures
Reduces the number of shares that the Company has available for issuance compared with the Company’s 2012 Long-Term Incentive Plan

 

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

 

 

Proposal 5

 

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.  

 

2020 Proxy Statement 5


 

Table of Contents

Table of Contents

 

Notice of 2020 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 26
   
Compensation of Directors 28
   
Executive Compensation 32
   
Compensation Discussion & Analysis 32
   
Report of the Executive Compensation and Management Development Committee 48
   
Executive Compensation Tables 49
   
Summary Compensation Table 49
   
2019 Grants of Plan-Based Awards Table 50
   
Outstanding Equity Awards Table at December 31, 2019 51
   
2019 Options Exercises and Stock Vested Table 53
   
2019 Nonqualified Deferred Compensation Table 54
   
Potential Payments on Termination or Change in Control 54
   
Chief Executive Officer Pay Ratio 55
   

 Proposal 2 

Advisory Vote on the Compensation Paid to Our Named Executive Officers

56
   
Audit Matters 57
   
Disclosure of Fees Charged by the Independent Registered Public Accounting Firm 57
   
Audit Committee Preapproval Policies 57
   
Report of the Audit Committee 58
   

 Proposal 3 

Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2020

59
   

 Proposal 4 

Approval of the 2020 Long-Term Incentive Plan

60
   

 Proposal 5 

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

70
   
Stock Ownership and Related Transactions 72
   
Equity Compensation Plan Information 72
   
Security Ownership of Certain Beneficial Owners and Management 72
   
Section 16(a) Beneficial Ownership Reporting Compliance 74
   
Certain Relationships and Related Transactions 74
   
Questions and Answers About the Proxy Materials and the Annual Meeting 75
   
Stockholder Proposals for the 2021 Annual Meeting 81
   
Appendix A – T. Rowe Price Group, Inc., 2020 Long-Term Incentive Plan A-1


 

6 T. Rowe Price Group
 

Table of Contents

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
Three directors are ethnically diverse, representing 30% of the independent directors on the Board
Three directors are veterans, representing 30% of the independent directors on the Board
50% of the directors joined the Board within the last five years; the average non-executive director tenure is five years
We added two independent directors, Dina Dublon and Robert Stevens, to the Board in June 2019.

 

INDEPENDENT DIRECTOR COMPOSITION    
     
 
     
DIRECTOR TENURE   DIRECTOR INDEPENDENCE
     
 

 

2020 Proxy Statement 7
 

Table of Contents

Our Board values the varying perspectives that individuals of differing backgrounds and experiences bring. 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:

 

         
    EXECUTIVE LEADERSHIP 100%  
  Directors with senior leadership and executive management backgrounds bring valuable practical experience to our Board, providing insights into challenging issues while remaining focused on our strategic initiatives  
         
         
    INVESTMENT MANAGEMENT 45%  
  A key to our success is our ability to provide investment management excellence, and directors with backgrounds in investment management help provide oversight of our strategy  
         
         
    TECHNOLOGY 36%  
    Our business is constantly adapting and incorporating new technological advances, and we benefit from critical insights provided from our directors’ experience  
         
         
    MARKETING AND DISTRIBUTION 55%  
  Directors with experience in marketing and distribution provide valuable guidance as we market our services and provide products to a diverse set of clients around the world  
         
         
    ACCOUNTING AND FINANCIAL REPORTING 36%  
  We are subject to complex financial reporting obligations, and we benefit from having directors with strong accounting and financial reporting experience  
         
    FINANCIAL MANAGEMENT 82%  
  As a global financial services company, our business is complex, and we benefit from having directors with strong financial management experience who provide financial guidance that will drive our business  
         
         
         
    INTERNATIONAL 73%  
  We invest and provide products globally, making international experience a vital perspective to our Board  
         
         
         
    STRATEGY AND EXECUTION 100%  
  Directors who experience developing and executing a strategic direction for an entity assist the Board in providing oversight of the Company’s strategy in a rapidly evolving business environment
         
         
    GOVERNMENT AND REGULATORY 73%  
  Substantive government experience on our Board offers us valuable insight into the regulatory environment and process in the many jurisdictions in which we operate and the implications to our business


 

8 T. Rowe Price Group
 

Table of Contents

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, 69

 

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. Until retiring in 2012, Mr. Bartlett 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 and chair of the audit committees of both Rexnord Corporation and Williams Scotsman. He is also a member of the nominating and corporate governance committee of Williams Scotsman. He also serves as a member of the board of directors and a member of the audit committee of FTI Consulting, Inc.

 

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, 71

 

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, risk oversight committee, and nominating and corporate governance committee of Discover Financial Services; a member of the board of directors, audit and compensation committees and serves as chair of the retirement plan committee of ManTech International Corporation; a member of the board of directors, audit and compensation committees of Marriott International; and a member of the board of directors and chair of the audit committee for Bloom Energy. Ms. Bush has informed the Nominating and Corporate Governance Committee that she will be retiring from one of these boards in May 2020, following which she will be on three other public company boards. Ms. Bush was also a director of the Pioneer Family of Mutual Funds from 1997 to 2012 and UAL Corporation from 2006 to 2010.

 

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.

 

2020 Proxy Statement 9
   

Table of Contents

Dina Dublon, 66

 

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. Ms. Dublon 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. From 2013 to 2018, she served on the supervisory board of Deutsche Bank A.G. and as chair of the risk committee; from 2002 to 2017, she served as a director of Accenture PLC; from 2005 to 2014 as a director of Microsoft Corporation; and from 1999 to 2002 as a director of Hartford Financial Services Group, Inc. Ms. Dublon serves on the board of overseers of Columbia University’s Mailman School of Public Health since 2018 and 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, 69

 

President

University of Maryland,
Baltimore County

 

Independent

 

Director since: 2013

 

Committee
Memberships:

 

   Audit

   Executive
Compensation
and Management
Development

 

Dr. Hrabowski has been an independent director of Price Group since 2013 and serves as a member of the Audit Committee and Executive Compensation and Management Development Committee. He has served as 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. He 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 holds 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 Institute (now Hampton University).

 

Dr. Hrabowski serves as director and 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
   

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Robert F. MacLellan, 65

 

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. Since November 2009, Mr. MacLellan has been 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.

 

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

 

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 our Board as well as significant accounting and financial reporting experience.

 

Olympia J. Snowe, 73

 

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.

 

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 a member of its audit committee and as chair of the nominating and corporate governance 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.

 

2020 Proxy Statement 11
   

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Robert J. Stevens, 68

 

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.

 

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

 

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, 60

 

Chair, President and
Chief Executive Officer

T. Rowe Price
Group, Inc.

 

Director since: 2016

 

Committee
Memberships:

 

   Executive

   Management (Chair)

 

Mr. Stromberg is the President and 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 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
   

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Richard R. Verma, 51

 

Vice Chairman and
Partner

The Asia Group

 

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. Mr. Verma is vice chairman and partner at The Asia Group. He previously served as United States ambassador to India from 2014 to 2017. Prior to his service as U.S. ambassador, Mr. Verma joined Steptoe & Johnson LLP, a global law firm, in 1998 and held many roles, including partner and senior counselor from 2011 to 2014. Mr. Verma also served as assistant secretary of state for legislative affairs from 2009 to 2011 and senior national security advisor to the Senate majority leader from 2004 to 2007. Mr. Verma is a U.S. Air Force veteran who, during active duty, served as judge advocate.

 

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

 

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, 63

 

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. From 2015 to 2019, Ms. Wijnberg served as executive advisor of Aquiline Holdings LLC, a private-equity investment firm specializing in the financial services sector. From 2007 to 2014, she was a partner and chief administrative officer of Aquiline Holdings LLC, a registered investment advisor and the holding company for Aquiline Capital Partners. 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 currently serves as 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., and as a member of the board of directors, the finance committee, and the audit committee of Cognizant Technology Solutions Corp. From 2003 to 2016, she served on the board of directors of Tyco International, PLC, and from 2007 to 2009, she served on the board of directors of TE Connectivity, Inc. She is also a director of two non-profits: Seeds of Peace and Spark MicroGrants 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.

 

2020 Proxy Statement 13
   

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Alan D. Wilson, 62

 

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 retired as executive chairman of McCormick & Company, Inc. in 2017, where he held many executive management roles, including chairman, president, and chief executive officer.

 

Mr. Wilson graduated from the University of Tennessee in 1980 with a B.S. in communications. 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 currently serves on the board of directors of Westrock Company and is a member of the finance committee and the nominating and corporate governance 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 2019, the Board held six meetings and approved four matters 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 meetings in 2019. 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 April 25, 2019, 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 various 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
   

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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 “Corporate Governance.”

 

Audit Committee            
Meetings in 2019: 5   Chair   Members                
The report of the Committee
appears on page 58.
             
    Bartlett   Dublon   Hrabowski   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 Rexnord Corporation and Williams Scotsman and as a member of the audit committee of FTI Consulting, Inc. 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 committee for Automatic Data Processing, Inc., a member of the audit committee of 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.

 

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

 

2020 Proxy Statement 15
 

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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 74.

 

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 (formerly known as the Risk Management Oversight 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, 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 2019: 6   Chair   Members                
The report of the
Committee appears on
page 48.
           
    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;

 

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; and

 

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

 

16 T. Rowe Price Group
 

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Nominating and Corporate Governance Committee
Meetings in 2019: 6   Chair   Members        
The report of the Committee
appears on page 20.
       
    Snowe   Bush   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 Company’s Corporate Governance Guidelines and other governance policies.

 

Executive Committee
Chair   Members    
   
Stromberg   Wilson   MacLellan

 

During 2019, Mr. Rogers, Mr. Stromberg, and Mr. Wilson served on the Executive Committee, until Mr. Rogers’ retirement from the Board on April 25, 2019. Following Mr. Rogers retirement from the Board, Mr. MacLellan joined the Executive Committee.

 

Responsibilities

 

The Executive Committee functions between meetings of the Board and 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. The Executive Committee approved one matter via unanimous written consent during 2019.

 

2020 Proxy Statement 17
 

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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 T. Rowe Price 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.

 

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.

 

18 T. Rowe Price Group
 

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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.

 

2020 Proxy Statement 19
 

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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.

 

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. 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
 

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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 26

 

   Three of our independent board members attended our Governance Week in 2019, an event designed to bring directors and investors together for direct engagement.

 

   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 five 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 2019.

 

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

 

2020 Proxy Statement 21
 

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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.

 

The 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 one to ten years, with an average tenure of approximately five years. When a director retires from our Board, 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. As part of this effort, during 2018 and 2019, the Nominating and Corporate Governance Committee engaged a consultant to find potential candidates. After reviewing possible director candidates, the Nominating and Corporate Governance Committee nominated, and our Board elected, Ms. Dublon and Mr. Stevens to the Board in June 2019. The Board selected Ms. Dublon because of her significant accounting and financial reporting experience developed throughout her career in the financial services industry, particularly her role as executive vice president and chief financial officer of a major financial institution. The Board selected Mr. Stevens due to his significant executive management experience, garnered through his tenure as chief executive officer of a publicly traded, multinational corporation. In addition the Board felt that the addition of both Ms. Dublon and Mr. Stevens to our Board would benefit the Company and its stockholders, resulting from their substantial financial, management, public policy, international affairs, and corporate social responsibility experience, along with their global perspectives.

 

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.

 

22 T. Rowe Price Group
 

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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.

 

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.

 

 

 

 

2020 Proxy Statement 23
 

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In accordance with the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance Committee considered Ms. Bush’s membership on four other public company boards of directors, including the fact that one of these public company boards recently went public and Ms. Bush had served as a director while it was private, and has continued her service following its IPO. Prior to such consideration, Ms. Bush informed the Nominating and Corporate Governance Committee that she would be retiring from one of her other public company boards as she had reached the mandatory retirement age for such board and would no longer be serving after May 2020. As a result, Ms. Bush would only be serving on three other public company boards. In consideration of all this, the Nominating and Corporate Governance Committee approved her continued service on such public company boards, and renominated her to serve on the Board.

 

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 Nominations 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 12, 2019, filed with the SEC on February 13, 2019, as Exhibit 3.1 to our Current Report on Form 8-K.

 

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.

 

24 T. Rowe Price Group
 

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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 chief legal 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 an 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.

 

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.

 

2020 Proxy Statement 25
 

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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 desirable, and that chairpersons will generally be considered for change at least every five years. 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.

 

Board Evaluations

 

In January 2020, we asked all Board members to reply to an anonymous evaluation questionnaire regarding the performance of the Board and its committees during 2019, 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 will implement suggestions and conclusions from the evaluation process 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. In 2019, we held nearly 100 meetings with our stockholders, including a majority of our top 35 fundamental active stockholders, to discuss the Company’s performance and progress against our long-term strategy, as well as broader trends across the investment management industry. We look forward to continuing to expand our stockholder outreach efforts.

 

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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

 

We from time to time receive stockholder 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 stockholders 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 chief legal 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 chief legal counsel will be responsible for the first review and logging of this correspondence. 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 chief legal 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 chief legal counsel will notify the chair of the Nominating and Corporate Governance Committee of any complaints that, in the opinion of the chief legal 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 chief legal 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 chief legal 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
Robert J. Stevens
Alan D. Wilson

 

2020 Proxy Statement 27
 

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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 2019 there were no changes to the compensation program for our non-employee directors.

 

Fees and Other Compensation in 2019

 

All non-employee directors received the following in 2019:

 

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 2019, 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. Any such election needs to be received prior to the beginning of the year they wish to have their payment deferred. Dr. Hrabowski, Ms. Snowe, and Mr. Wilson elected to have their 2019 director fees deferred to 2020. In 2020, our non-employee directors will also have the option 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.

 

28 T. Rowe Price Group
 

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Equity-Based Compensation in 2019

 

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, other than Ms. Dublon and Mr. Stevens who joined the Board in 2019, have achieved and maintain the ownership goal as of the date of this proxy statement.

 

2020 Proxy Statement 29
 

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2019 Director Compensation1

 

The following table sets forth information regarding the compensation earned by, or paid to, directors who served on our Board during 2019. 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
AWARDS4,5
   ALL OTHER
COMPENSATION6
   TOTAL 
Mark S. Bartlett  $136,500   $200,001              $10,000   $346,501 
Edward C. Bernard  $   $   $87,500   $87,500 
Mary K. Bush  $118,000   $241,786   $10,000   $369,786 
Dina Dublon2  $71,750   $306,515   $10,000   $388,265 
Dr. Freeman A. Hrabowski, III  $121,500   $234,294   $10,000   $365,794 
Robert F. MacLellan  $131,500   $215,721   $   $347,221 
Brian C. Rogers3  $100,000   $   $   $100,000 
Olympia J. Snowe  $128,000   $227,443   $10,000   $365,443 
Robert J. Stevens2  $70,333   $306,515   $   $376,848 
Richard R. Verma  $121,500   $212,502   $   $334,002 
Sandra S. Wijnberg  $121,500   $214,214   $10,000   $345,714 
Alan D. Wilson  $133,000   $242,203   $   $375,203 

 

1 Includes only those columns relating to compensation awarded to, earned by, or paid to non-employee directors for their services in 2019. All other columns have been omitted.
   
2 Represent pro-rata amounts for the time Ms. Dublon and Mr. Stevens were members of the Board in 2019.
   
3 Represent the fees earned by Mr. Rogers in 2019 for his role as nonexecutive chair of the Board before his retirement on April 25, 2019.
   
4 The following table represents the equity awards granted in 2019 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, except Ms. Dublon and Mr. Stevens who received an award with a grant date value of $300,000 when they joined the board in 2019. 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.

 

DIRECTOR  GRANT DATE   NUMBER OF
RESTRICTED
SHARES
   NUMBER OF
RESTRICTED
UNITS
   GRANT DATE
FAIR VALUE OF
STOCK AND
OPTION AWARDS
 
Mark S. Bartlett   4/26/2019    1,851        $200,001 
Mary K. Bush   3/29/2019         103   $10,334 
    4/26/2019    1,851        $200,001 
    6/28/2019         95   $10,412 
    9/27/2019         93   $10,484 
    12/30/2019         87   $10,555 
Dina Dublon   6/13/2019         2,828   $300,023 
    6/28/2019         20   $2,149 
    9/27/2019         19   $2,164 
    12/30/2019         18   $2,179 
Dr. Freeman A. Hrabowski, III   3/29/2019         74   $7,430 
    4/26/2019         1,851   $200,001 
    6/28/2019         81   $8,893 
    9/27/2019         79   $8,955 
    12/30/2019         74   $9,015 

 

30 T. Rowe Price Group
   

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DIRECTOR  GRANT DATE   NUMBER OF
RESTRICTED
SHARES
   NUMBER OF
RESTRICTED
UNITS
   GRANT DATE
FAIR VALUE OF
STOCK AND
OPTION AWARDS
 
Robert F. MacLellan   3/29/2019         39   $3,888 
    4/26/2019    1,851        $200,001 
    6/28/2019         36   $3,917 
    9/27/2019         35   $3,944 
    12/30/2019         33   $3,971 
Olympia J. Snowe   3/29/2019         57   $5,736 
    4/26/2019         1,851   $200,001 
    6/28/2019         66   $7,186 
    9/27/2019         64   $7,236 
    12/30/2019         60   $7,284 
Robert J. Stevens   6/13/2019         2,828   $300,023 
    6/28/2019         20   $2,149 
    9/27/2019         19   $2,164 
    12/30/2019         18   $2,179 
Richard R. Verma   3/29/2019         20   $2,041 
    4/26/2019         1,851   $200,001 
    6/28/2019         32   $3,463 
    9/27/2019         31   $3,487 
    12/30/2019         29   $3,510 
Sandra S. Wijnberg   3/29/2019         35   $3,515 
    4/26/2019    1,851        $200,001 
    6/28/2019         32   $3,542 
    9/27/2019         32   $3,566 
    12/30/2019         29   $3,590 
Alan D. Wilson   3/29/2019         94   $9,386 
    4/26/2019    1,851        $200,001 
    6/28/2019         99   $10,964 
    9/27/2019         97   $10,939 
    12/30/2019         90   $11,013 

 

5 The following table represents the aggregate number of equity awards outstanding as of December 31, 2019. The outstanding equity awards held by Mr. Bernard and Mr. Rogers were granted while they were executive officers of the Company.

 

DIRECTOR  UNVESTED
STOCK AWARDS
   UNVESTED
STOCK UNITS
   UNEXERCISED
OPTION AWARDS
   TOTAL   VESTED
STOCK UNITS
 
Mark S. Bartlett   1,851              1,851      
Edward C. Bernard        40,103    149,461    189,564      
Mary K. Bush   1,851              1,851    13,974 
Dina Dublon        2,885         2,885      
Dr. Freeman A. Hrabowski, III        1,888    26,008    27,896    10,048 
Robert F. MacLellan   1,851         42,942    44,793    5,257 
Brian C. Rogers             43,559    43,559      
Olympia J. Snowe        1,888         1,888    7,757 
Robert J. Stevens        2,885         2,885      
Richard R. Verma        1,888         1,888    2,760 
Sandra S. Wijnberg   1,851              1,851    4,753 
Alan D. Wilson        1,888         1,888    12,693 

 

6 For Mr. Bernard, the amount represents fees paid while he was a Board member pursuant to a consulting agreement with the Company following his retirement as an executive officer on December 31, 2018. For the remaining directors, the amounts represent personal gifts matched by our sponsored T. Rowe Price Foundation to qualified charitable organizations.

 

2020 Proxy Statement 31
   

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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 2019 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 2019 are as follows:

 

       
William J. Stromberg   Céline S. Dufétel   Robert W. Sharps   Christopher D. Alderson   Eric L. Veiel
Chair, President and
Chief Executive Officer
  Chief Financial Officer
and Treasurer
  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 2019. 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 evaluating NEO performance and making annual and long-term incentive compensation decisions.

 

32 T. Rowe Price Group
   

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2019 Financial Performance Highlights

 

Our net revenues and earnings per share have continued to grow significantly over the last five years. Results for 2019 in comparison to the prior two years and 2014 (five years) are as follows:

 

 

1 Certain amounts for 2017 have been adjusted to reflect the adoption of new revenue accounting guidance on January 1, 2018. For more information see the notes to the consolidated financial statements in Item 8 of the 2018 Annual Report Form on 10-K.
   
Our AUM increased by $244.5 billion from December 31, 2018, to $1,206.8 billion as of December 31, 2019 and our average AUM for 2019 increased 7% over the 2018 period. Clients added $13.2 billion and market appreciation and income increased AUM by $231.3 billion.
   
Organic AUM growth of 1.4% was driven primarily by strong flows from U.S. intermediaries and clients in APAC and EMEA, including success in our local Japanese funds. Our multi-asset franchise continued to see positive net flows, with solid flows experienced across international equity and fixed income.
   
Our net revenues increased 4.6% over 2018, lower than our average AUM which increased 7.0%, due primarily to client transfers of $23.2 billion to lower fee share classes and vehicles, along with, to a lesser extent fee reductions made by us to meet competitive demands.
   
Our overall financial condition remains very strong, as we finished the year with $7.1 billion of stockholders’ equity, $3.7 billion of cash and discretionary investments, and no debt. We also had redeemable seed capital investments in T. Rowe Price investment products of $1.3 billion at December 31, 2019.
   
Our strong balance sheet and operating results enabled us to return $1.4 billion, or 68% of 2019 net income, to stockholders through dividends and share repurchases. We increased our annual recurring dividend for the 33rd consecutive year, by 8.6%. In 2019, we expended $708.8 million to repurchase 7.0 million shares, or 2.9% of our outstanding common stock at an average price of $101.65 per share. Dividends and stock repurchases vary depending upon our financial performance, liquidity, market conditions, and other relevant factors.

 

2020 Proxy Statement 33
   

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2019 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 percentage of the Price funds (across primary share classes) that outperformed their comparable Morningstar median on a total return basis and that are in the top Morningstar quartile for the one-, three-, five-, and 10-years ended December 31, 2019, were:

 

   1 YEAR   3 YEARS   5 YEARS   10 YEARS 
Outperformed Morningstar median1                
All funds   64%   75%   80%   82%
Multi-asset funds   69%   85%   94%   95%
                     
Top Morningstar quartile1                    
All funds   32%   45%   50%   55%
Multi-asset funds   36%   59%   65%   74%

 

1 Source: © 2019 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. Past performance is no guarantee of future results. Historically, the firm has disclosed the percentage of U.S. mutual funds (across all share classes) that outperformed their comparable Lipper averages on a total return basis and that are in the top Lipper quartile for the same periods. Investment performance results using the new measures are similar to the Lipper results.
   
84% of our rated U.S. mutual funds’ AUM ended the quarter with an overall rating of four or five stars from Morningstar.
   
The performance of our funds and institutional strategies against benchmarks remains competitive and are solid over the ten year time period.

 

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 9% in 2019 to 661, including adding a head of Exchange Traded Funds (ETFs) for the first time.
   
We advanced our corporate access, ESG and equity data insight capabilities.
   
We continued to expand our product offerings with the launch of several new investment strategies to meet evolving client demands. New strategies include Dynamic Credit, Europe Select Equity, Global Government Bond, China Evolution Equity, Sustainable Global Focused Growth, and Target Allocation active model portfolios.
   
We received approval from the SEC to launch semi-transparent ETFs and look to be in market with four equity strategies in 2020.
   
We continued to broaden and diversify our distribution capabilities through the launch of several sub-funds, share classes, and new vehicles across our international lineups, including our Japanese Investment Trust Management Company, U.K. Open-ended Investment Company, SICAV, and Separately Managed Accounts.
   
Global investment management and trading operation processes continue to evolve to meet growing complexity.
   
We continued to have good client satisfaction and loyalty in our individual investor business unit and have made progress on a digital client engagement experience in our retirement plan services business unit.

 

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 continue to enhance and evolve our governance and operating model as follows:

 

  We consolidated our distribution teams into one global distribution business unit led by Robert Higginbotham.
     
  We expanded the role of the Risk and Operational Steering Committee to provide a more thorough oversight of our strategic programs.

 

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  The newly established Investment Management Steering Committee completed its first year providing an enhanced coordination of our investments, product and distribution activities.
     
  We welcomed George Riedel, head of U.S. Intermediaries, and Michelle Swanenburg, head of Human Resources, to the Management Committee.

 

2019 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 2019, Mr. Stromberg’s total compensation increased 11.5% over the prior year, which is largely driven by an increase in the value of his 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 2019, consistent with Company performance and results in each of the NEO’s areas of responsibility. For Ms. Dufétel, her total compensation increase of 62% in 2019 also reflects a competitive adjustment following significant expansion of her responsibilities over her two-years serving as our CFO, 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.
   
As discussed in our proxy statement last year, the Compensation Committee determined that, beginning in 2019, our AICP would be funded as a percentage of net operating income, and long-term equity awards to NEOs would be split equally between performance-based RSUs subject to a three-year performance goal, and time-based RSUs subject to a three-year vesting schedule.

 

2020 Proxy Statement 35
   

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Executive Compensation Practices

 

At the 2019 annual meeting of stockholders, our stockholders cast a non-binding advisory vote on the compensation of the NEOs. Over 95% 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 years of time-based vesting.

 

   Impose double-trigger vesting on acceleration of awards granted under our 2012 Long-Term Incentive Plan (2012 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.

 

Key Elements of 2019 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.

 

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As part of their annual agenda in 2018, the Compensation Committee reviewed the design of the AICP and Long-Term Equity Award programs with assistance from management and the Compensation Committee’s independent compensation consultant, Johnson Associates. Based on their evaluation of peer practices and the desire to continue to align with long-term stockholder interests, the Compensation Committee incorporated changes to our AICP and Long-Term Equity Award programs for 2019. The key features and purpose of the primary compensation elements are detailed in the table below.

 

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 2019, 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 2020 through 2022, these awards would vest 50% per year starting in December 2023.

 

•   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 2020.

 

•   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.

 

2020 Proxy Statement 37
 

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Annual Incentive Compensation Plan Bonus Pool

 

In February 2019, the Compensation Committee set the AICP maximum bonus pool 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 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 are now subject to a longer 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. 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). 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. The time-based RSUs 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.

 

2019 Compensation Decisions

 

Given our shared and collaborative leadership structure, when setting the compensation in 2019, 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.

 

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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 2019 except for Mr. Alderson, whose base salary since 2017 had been capped at 240,000 GBP; when he relocated to our Hong Kong office effective January 1, 2019, his base salary was capped at 2,700,000 HKD.

 

Incentive Compensation

 

At the end of 2018, the Board approved senior management goals for 2019, 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 2019 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, including specific targeted product introductions.

     
     
Net Flows and Distribution Capabilities   Enterprise Capabilities and Talent
     

•   Enhance distribution, client service and marketing capabilities to diversify globally and support long-term organic growth through intermediary and institutional channels.

 

•   Retain assets, deliver high quality service, and improve efficiencies of our US. direct distribution and retirement plan recordkeeping business.

 

•   Effectively and efficiently deliver technology infrastructure and architecture that supports the organization and continues to enhance security.

 

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

 

•   Enhance our processes and systems to maintain a strong internal controls environment, improve client experience, and gain ongoing operational efficiencies.

     
     
Financial Performance    
     

•   Deliver attractive financial results and balance sheet strength for our stockholders over the long-term.

 

•   Enhance stewardship of firm resources and sustain cost efficiencies in order to reinvest in the business.

   

 

2020 Proxy Statement 39
 

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Individual Performance Considerations

 

In addition to contributions to the 2019 priorities summarized above, and the Company’s financial and strategic performance highlighted in the executive summary on page 32, the Compensation Committee considered the following individual contributions when setting 2019 compensation for our NEOs.

 

William J. Stromberg

 

Chair, President
and Chief Executive
Officer

ROLE CONSIDERATIONS

 

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

 

INDIVIDUAL ACHIEVEMENTS

 

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

 

   Led the successful transition of a new leadership structure following the retirement of the Vice Chairman; broadened the Management Committee with the addition of the head of U.S. Intermediary distribution and hired a new head of Global Human Resources.

 

   Oversaw the development of the Investment Management Steering Committee to ensure long-term product health and operationalize cooperation between investments and distribution.

 

   Expanded the responsibilities of the Risk and Operational Steering Committee to govern the execution of the firm’s strategic initiatives.

 

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

 

   Revenues grew 4.6%, diluted non-GAAP earnings per share increased 12.9%, and dividends per share rose 8.6%. Return on equity was a healthy 32% for 2019 versus 31% in 2018.

 

   The Company returned $1.4 billion to stockholders in 2019 through dividends and share repurchases, while maintaining an exceptionally strong balance sheet.

   
Céline S. Dufétel

 

Chief Financial Officer
and Treasurer

ROLE CONSIDERATIONS

 

   Leadership, responsibility and performance as CFO and Treasurer, and chair of the Risk and Operational Steering Committee. Significantly expanded role and responsibilities in 2019 to include leadership of global investment operations and enterprise change management in addition to existing responsibilities for risk management and strategic initiatives.

 

INDIVIDUAL ACHIEVEMENTS

 

   Enhanced strategic and financial planning, and budgeting processes.

 

   Led quarterly business reviews of each business unit with an increased focus on business success metrics.

 

   Hired talented executives to lead the Global Investment Operations and Enterprise Change Office functions and strengthened the Company’s governance and execution.

 

   Continued to strengthen the talent of the CFO Group while improving diversity.

 

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

 

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

 

40 T. Rowe Price Group
 

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Robert W. Sharps

 

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.

 

INDIVIDUAL ACHIEVEMENTS

 

   Strong investment performance over three-, five-, and 10-years against peers, particularly across equity, with further strengthening of the investment teams.

 

   Guided fixed income leadership transition to Andrew McCormick, following retirement of Edward A. Wiese.

 

   Provided leadership of the five-person chief investment officer group that continues to represent our investment divisions with distinction.

 

   Served as director of the Price funds’ board and as integral presenter at Price Group board meetings.

 

   Key contributor on the Management, Management Compensation 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 very strong over three-, five-, and 10-years against peers and against benchmarks.

 

   Central leadership role in developing the talent and culture of the team to deliver excellent results at scale.

 

   Worked with Product team to deliver on three-year product road map for international equity and led the development of the China Evolution strategy.

 

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

 

   Advanced the implementation plan to strengthen the International Equity leadership team.

   
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 very strong across the three-, and five- and 10-years against peers and solid against benchmarks.

 

   Successfully managed transitions after departure of U.S. Small-Cap Growth portfolio manager and team. Rebuilt depth of investment talent throughout rest of 2019.

 

   Made substantial progress on integration of ESG into investment process.

 

   Managed implementation of the process to pay for third-party investment research in the U.S.

 

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

 

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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 2019 and 2018.

 

   2019           2019 
   MAXIMUM   2019   2018   PAYMENT 
   PAYOUT   ANNUAL   ANNUAL    PERCENTAGE 
   BASED ON THE    INCENTIVE    INCENTIVE   CHANGE 
NAME  TOTAL POOL   PAYMENT   PAYMENT   OVER 2018 
William J. Stromberg               $14.3          $8.5          $8.2    3.7% 
Céline S. Dufétel  $4.8   $3.6   $2.0    77.5% 
Robert W. Sharps  $14.3   $8.7   $8.1    7.4% 
Christopher D. Alderson1  $11.9   $7.1   $6.7    7.1% 
Eric L. Veiel2  $11.9   $7.0   $    n/a 

 

1 Bonus amounts received in 2018 by Mr. Alderson pursuant to his employment agreement were 5.2 million British pounds. In 2019, Mr. Alderson relocated to our Hong Kong office and received a bonus of HKD 57.8 million.
2 Mr. Veiel was not a named executive officer in 2018.

 

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 2018 to 2019 is a reflection of both her very strong performance as the CFO and Treasurer and her significantly expanded roles and responsibilities in 2019 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 2019.

 

Long-Term Equity Awards

 

As part of our 2019 long-term equity award program, the Compensation Committee approved award values to be 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 ($120.79 for 2019). The NEOs were granted the following long-term incentive values (in millions) and resulting mix of performance-based and time-based RSUs in 2019.

 

       2019   2019TIME-       2019 LTI 
   2019    PERFORMANCE-   BASED       AWARD 
   EQUITY   BASED    RESTRICTED    2018 EQUITY   VALUE 
    INCENTIVE   RESTRICTED   STOCK    INCENTIVE   CHANGE 
NAME  VALUE   STOCK UNITS   UNITS1   VALUE    OVER 2018 
William J. Stromberg       $5.7    23,388    23,388      $4.5    27.0% 
Céline S. Dufétel  $2.1    8,693    8,693   $1.2    75.0% 
Robert W. Sharps  $5.0    20,491    20,491   $4.1    20.7% 
Christopher D. Alderson  $2.5    10,349    10,349   $2.5    2.0% 
Eric L. Veiel2  $3.2    13,040    13,040   $    n/a 

 

1 Time-based RSU’s vest in equal installments over the three years beginning in December in the year after the grant date.
2 Mr. Veiel was not a named executive officer in 2018.

 

42 T. Rowe Price Group
 

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Performance-Based RSUs - Performance Thresholds and Vesting

 

The performance thresholds established by the Compensation Committee for the performance-based RSUs granted in 2019 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. Eaton Vance Corp. Invesco Ltd.
AllianceBernstein L.P. Federated Investors Legg Mason, Inc.
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 2019, 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 2019 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%

 

As detailed in the table below, the NEOs earned the full number of eligible RSUs that were granted in December 2018.

 

      TROW OPERATING  AMOUNT EARNED   
      MARGIN AS PERCENT  AND SUBJECT   
      OF INDUSTRY  TO STANDARD  VESTING START
GRANT DATE  PERFORMANCE PERIOD  AVERAGE MARGIN  VESTING SCHEDULE  MONTH/YEAR
December 2018  January 1, 2019 to December 31, 2019  Greater than 100%  100% Granted  February 2020
December 2019  January 1, 2020 to December 31, 2022  Not determinable at this time  December 2023

 

The peer group used to calculate the Industry Average Margin for the 2018 performance-based RSUs includes the same companies included in the 2019 performance peer group referenced above. 2019 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.

 

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.

 

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The table below summarizes the actions taken by the Compensation Committee throughout 2019.

 

 

First Quarter

 

•   Certify prior-year financial results for payout of the AICP.

 

•   Design and establish current year AICP and long-term equity programs.

 

•   Designate participants in the current year AICP and set each NEO’s maximum payout percentage.

 

 

Fourth Quarter

 

•   Review projected peer compensation data provided by our independent compensation consultant and McLagan Partners survey data.

 

•   Evaluate the Company’s performance against its goals.

 

•   Evaluate executive officer performance against goals of their respective roles, with input from the CEO for other executive officers.

 

•   Approve the size of the Company’s overall annual bonus pool and determine the annual incentive cash pool payout for each NEO and other AICP participants.

 

•   Approve the size and parameters of the year’s equity incentive program and determine the award value for each NEO.

 

•   Define the performance metric(s) and performance period for RSUs granted to the executive officers as part of the annual equity incentive program.

 

Second Quarter

 

•   Review our compensation governance practices.

 

•   Assess progress against the Company’s strategic imperatives and related goals and objectives for the year.

 

•   Review the Company’s current year-to-date performance, including financial, investment, and client service performance.

 

•   Consider with members of the Management Compensation Committee the potential funding size of the overall annual bonus pool.

 

•   Consider stockholder and proxy advisor feedback in connection with our say-on-pay vote results.

 

•   Evaluate and approve changes to the current peer comparators used to assess competitive pay for executive officers.

 

•   Review the design of peer short-term and long-term incentive compensation programs.

 

Third Quarter

 

•   Review with management and our independent compensation consultant the external trends in both the investment management industry and, more broadly, regulatory and other developments affecting executive compensation.

 

•   Assess progress against the Company’s strategic imperatives and related goals and objectives for the year.

 

•   Review the Company’s current year-to-date performance, including financial, investment, and client service performance.

 

•   Consider with members of the Management Compensation Committee the potential funding size of the overall annual bonus pool.

 

•   Review and approve any changes to incentive plan and award designs for the following fiscal year.

 

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 Committee, a committee comprised of members of the Management Committee.

 

44 T. Rowe Price Group
 

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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 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 2019 and attended all Compensation Committee meetings during the year. 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 financial services industry. Johnson Associates has no relationship with Price Group other than as the Board’s compensation consultant.

 

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. Johnson Associates advised the Compensation Committee on competitive practices and design considerations for the changes to our AICP and our long-term equity awards implemented in 2019. The consultant also advised the Compensation Committee on the final 2019 incentive compensation decisions for the President and CEO, and for the other NEOs.

 

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 2019.

 

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.

 

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.

 

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,

 

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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 2018, 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. Below is the list of the final 2019 peer group agreed to 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.

   Legg Mason, Inc.

   Northern Trust

   TD Ameritrade Holding Corp

 

The companies making up the peer group listed above were selected because they are public asset managers with significant AUM as well as comparable financial services and brokerage companies given their assets and scale. 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, JPMorgan 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 2019, 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.

 

46 T. Rowe Price Group
 

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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 2019, we contributed $148,000 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 2019, Mr. Alderson participates in the mandatory retirement benefit program offered to all associates in Hong Kong. For 2019, we contributed $34,460 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

 

The Supplemental Savings Plan provides certain senior officers the opportunity to defer receipt of up to 100% of 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 2019, Messrs. Sharps, Stromberg, and Veiel elected to have a portion of their AICP payout deferred. See our Nonqualified Deferred Compensation Table on page 54 for more information.

 

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 54 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 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.

 

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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. Each of our NEOs, has 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 x 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, 2019.

 

  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

 

48 T. Rowe Price Group
 

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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.

 

NAME AND PRINCIPAL POSITION   YEAR  SALARY   BONUS3   STOCK
AWARDS4
   NON-EQUITY
INCENTIVE PLAN
 COMPENSATION5
   ALL OTHER
 COMPENSATION6 
   TOTAL 
William J. Stromberg  2019  $350,000   $   $5,650,073        $8,500,000           $88,273   $14,588,346 
Chair, President, Chief  2018  $350,000   $   $4,450,019   $8,200,000   $86,734   $13,086,753 
Executive Officer  2017  $350,000   $39,759   $3,550,028   $7,600,000   $130,182   $11,669,969 
Céline S. Dufétel  2019  $350,000   $   $2,100,055   $3,550,000   $79,798   $6,079,853 
Chief Financial Officer and Treasurer  2018  $350,000   $   $1,200,071   $2,000,000   $204,718   $3,754,789 
Robert W. Sharps  2019  $350,000   $   $4,950,216   $8,700,000   $86,696   $14,086,912 
Head of Investments and Group  2018  $350,000   $   $4,100,029   $8,100,000   $85,670   $12,635,699 
Chief Investment Officer  2017  $350,000   $34,159   $3,050,036   $7,300,000   $84,169   $10,818,364 
Christopher D. Alderson2  2019  $344,600   $   $2,500,111   $7,147,200   $48,769   $10,040,680 
Co-Head of Global Equity  2018  $320,400   $   $2,450,023   $6,674,800   $54,973   $9,500,196 
   2017  $309,300   $21,345   $2,000,072   $5,799,200   $32,800   $8,162,717 
Eric L. Veiel  2019  $350,000   $   $3,150,203   $7,000,000   $86,449   $10,586,652 
Co-Head of Global Equity                                 

 

1 Includes only those columns relating to compensation awarded to, earned by, or paid to the NEOs in 2019, 2018, and 2017. All other columns have been omitted. Ms. Dufétel was named CFO and Treasurer in February 2018, therefore the amounts for 2017 have been omitted. Mr. Veiel became a named executive officer in 2019, therefore the amounts for 2018 and 2017 have been omitted.
2 Cash amounts received by Mr. Alderson pursuant to his employment agreement were paid in Hong Kong dollars (HKD) in 2019 and British pounds (GBP) in 2018 and 2017. 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 2019 was 1 HKD to 0.12763 USD; 2018 was 1 GBP to 1.33496 USD; and 2017 was 1 GBP to 1.28870 USD. Mr. Alderson’s cash compensation for each year in local currency was HKD 58,700,000 in 2019, £5,240,000 in 2018, and £4,740,000 in 2017.
3 Messrs. Stromberg, Sharps, and Alderson, along with other equity incentive participants, were paid a one-time supplemental cash bonus in 2017 for the cash dividend equivalents lost as a result of changing from a semiannual equity grant to an annual equity grant.
4 Represents 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 2019.
5 Represents cash amounts awarded by the Compensation Committee and paid to NEOs under the 2019 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.
6 The following types of compensation are included in the “All Other Compensation” column for 2019:

 

           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          $37,000           $4,620             $4,000         $25,000       $17,653   $88,273 
Céline S. Dufétel  $37,000   $4,620   $   $25,000   $13,178   $79,798 
Robert W. Sharps  $37,000   $4,620   $4,000   $25,000   $16,076   $86,696 
Christopher D. Alderson  $34,460   $   $   $12,944   $1,365   $48,769 
Eric L. Veiel  $37,000   $4,620   $4,000   $25,000   $15,829   $86,449 

 

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a Cash compensation for the amount calculated under the U.S. retirement program that could not be credited to their retirement accounts in 2019 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 2019, we contributed $34,460 to this program on his behalf.
b Matching contributions paid under our Employee Stock Purchase Plan offered to all employees of Price Group and its subsidiaries.
c NEOs, 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 2019, all of the NEOs were eligible to have up to $25,000 matched.
d Costs 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.

 

2019 Grants of Plan-Based Awards Table1

 

The following table provides information concerning each plan-based award granted in 2019 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  2/11/20192          $   $14,322,008                
   12/3/20193  12/2/2019             46,776    46,776      $5,650,073 
Céline S. Dufétel  2/11/20192     $   $4,774,003                
   12/3/20193  12/2/2019             17,386    17,386   $2,100,055 
Robert W. Sharps  2/11/20192     $   $14,322,008                
   12/3/20193  12/2/2019             40,982    40,982   $4,950,216 
Christopher D. Alderson  2/11/20192     $   $11,935,007                
   12/3/20193  12/2/2019             20,698    20,698   $2,500,111 
Eric L. Veiel  2/11/20192     $   $11,935,007                
   12/3/20193  12/2/2019             26,080    26,080   $3,150,203 

 

1 Includes only those columns relating to plan-based awards granted during 2019. All other columns have been omitted.
2 The maximum represents the highest possible amount that could have been paid to each of these individuals under the 2019 AICP based on our 2019 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 2019, 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.
3 Represents both time-based RSUs and performance-based RSUs granted as part of the Company’s annual equity incentive program from its 2012 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, 2020, December 10, 2021, and December 9, 2022. The performance-based RSUs are subject to a performance-based vesting threshold with a three-year performance period, which for the December 2019 grant, will run from January 1, 2020 to December 31, 2022. For each grant, 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 8, 2023 and December 10, 2024. 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.
4 Represents the grant date fair value of the time-based RSUs and performance-based RSUs granted in 2019. 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.

 

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Outstanding Equity Awards Table at December 31, 20191

 

The following table shows information concerning equity incentive awards outstanding at December 31, 2019, 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
NAME   GRANT
DATE
  NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS:
EXERCISABLE
  NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS:
UNEXERCISABLE
  OPTION
EXERCISE
PRICE
  OPTION
EXPIRATION
DATE
  NUMBER
OF SHARES
OR UNITS
OF STOCK
THAT
HAVE NOT
VESTED
(#)
  MARKET
VALUE OF
SHARES
OR UNITS
OF STOCK
THAT
HAVE NOT
VESTED
($)2
  EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
UNITS
THAT HAVE
NOT VESTED
(#)
  EQUITY
INCENTIVE
PLAN AWARDS:
MARKET VALUE
OF UNEARNED
UNITS THAT
HAVE NOT
VESTED ($)2
William J.
Stromberg
  2/21/2013     1,434            $ 69.671     2/21/2023                        
  2/19/2014     17,936         $ 77.944     2/19/2024                        
  9/9/2014     17,936         $ 78.442     9/9/2024                        
  2/19/2015     14,349     3,5873   $ 80.949     2/19/2025     1,0504a   $ 127,9324a            
  9/10/2015     14,000     3,5003   $ 70.920     9/10/2025     1,0504b   $ 127,9324b            
  2/17/2016                             5,1244c   $ 624,3084c            
  9/8/2016                             5,2304d   $ 637,2234d            
  12/6/2017                             27,9014e   $ 3,399,4584e            
  12/11/2018                                         48,3545a      $ 5,891,4515a
  12/3/2019                             23,3886e   $ 2,859,5946e     23,3885b    $ 2,849,5945b
Céline
S.Dufétel
  12/6/2017                             3,5374e   $  430,9484e            
  12/11/2018                                         13,0405a    $ 1,588,7945a
  12/3/2019                             8,6936e   $ 1,059,1556e     8,6935b    $ 1,059,1555b
Robert W.
Sharps
  2/17/2011     1,479         $ 67.561     2/17/2021                        
  2/23/2012     1,692         $ 59.069     2/23/2022                        
  2/21/2013     1,434         $ 69.671     2/21/2023                        
  9/10/2013     20,499         $ 70.285     9/10/2023                        
  2/19/2014     20,499         $ 77.944     2/19/2024                        
  9/9/2014     20,499         $ 78.442     9/9/2024                        
  2/19/2015     24,599     6,1493   $ 80.949     2/19/2025     1,8006a   $ 219,3126a            
  9/10/2015     24,000     6,0003   $ 70.920     9/10/2025     1,8006a   $ 219,3126a            
  2/17/2016                             56,9324c   $ 6,936,5954c            
  2/17/2016                             7,5446b   $ 919,1616b            
  9/8/2016                             7,7006b   $ 938,1686b            
  12/6/2017                             23,9724e   $ 2,920,7484e            
  12/11/2018                                         44,5515a    $ 5,428,0945a
  12/3/2019                             20,4916e     2,496,6236e     20,4915b    $ 2,496,6235b
Christopher D.
Alderson
  2/19/2014     4,100         $ 77.944     2/19/2024                        
  9/9/2014     20,499         $ 78.442     9/9/2024                        
  2/19/2015     16,399     4,1003   $ 80.949     2/19/2025     1,2004a   $ 146,2084a            
  9/10/2015     16,000     4,0003   $ 70.920     9/10/2025     1,2004b   $ 146,2084b            
  2/17/2016                             4,8404c   $ 589,7064c            
  9/8/2016                             4,9404d   $  601,8904d            
  12/6/2017                             15,7204e   $ 1,915,3254e            
  12/11/2018                                         26,6225a    $ 3,243,6245a
  12/3/2019                             10,3496e   $ 1,260,9226e     10,3495b    $ 1,260,9225b

 

2020 Proxy Statement 51
 

Table of Contents

        OPTION AWARDS   STOCK AWARDS
NAME   GRANT
DATE
  NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS:
EXERCISABLE
  NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS:
UNEXERCISABLE
  OPTION
EXERCISE
PRICE
  OPTION
EXPIRATION
DATE
  NUMBER
OF SHARES
OR UNITS
OF STOCK
THAT
HAVE NOT
VESTED
(#)
  MARKET
VALUE OF
SHARES
OR UNITS
OF STOCK
THAT
HAVE NOT
VESTED
($)2
  EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF
UNEARNED
UNITS
THAT HAVE
NOT VESTED
(#)
  EQUITY
INCENTIVE
PLAN AWARDS:
MARKET VALUE
OF UNEARNED
UNITS THAT
HAVE NOT
VESTED ($)2
Eric L.
Veiel
  2/21/2013     11,273            $ 69.671     2/21/2023                        
  9/10/2013     13,324         $ 70.285     9/10/2023                        
  2/19/2014     14,349         $ 77.944     2/19/2024                        
  9/9/2014     14,349         $ 78.442     9/9/2024                        
  2/19/2015     14,349     3,5873   $ 80.949     2/19/2025     1,0506a   $ 127,9326a            
  9/10/2015     14,000     3,5003   $ 70.920     9/10/2025     1,0506a   $ 127,9326a            
  12/10/2015                             10,9094c   $ 1,329,1534c            
  2/17/2016                             4,8404c   $ 589,7064c            
  9/8/2016                             4,9404d   $ 601,8904d            
  12/6/2017                             11,7906c   $ 1,436,4946c            
  12/11/2018                             21,7336d   $ 2,647,9496d            
  12/12/2018                             2,5536d   $ 311,0586d            
  12/3/2019                             13,0406e   $ 1,588,7946e     13,0405b   $ 1,588,7945b

 

1 Includes only those columns that related to outstanding equity awards at December 31, 2019. All other columns have been omitted.
   
2 The market value of these stock awards was calculated using the closing market price per share of Price Group’s common stock on December 31, 2019.
   
3 The remaining unexercisable outstanding option awards at December 31, 2019 will vest on December 10, 2020.
   
4 For each performance-based RSU award earned and not vested at December 31, 2019, the following table includes the date of the meeting or unanimous consent at which the Compensation Committee certified that the performance threshold was met, the awards’ performance period, and the awards remaining vesting schedule.

 

FOOTNOTE   DATE
CERTIFIED
  PERFORMANCE
PERIOD
START DATE
  PERFORMANCE
PERIOD END DATE
  PERCENTAGE OF
OUTSTANDING
  VEST DATES
4a   Feb-2016   January 1, 2015   December 31, 2015   100%   12/10/2020            
4b   Sep-2016   July 1, 2015   June 30, 2016   100%   12/10/2020            
4c   Feb-2017   January 1, 2016   December 31, 2016   50%   12/10/2020   12/10/2021   12/10/2021    
4d   Sep-2017   July 1, 2016   June 30, 2017   50%   12/10/2020   12/10/2021   12/10/2021    
4e   Feb-2019   January 1, 2018   December 31, 2018   25%   02/28/2020   02/28/2021   02/28/2022   02/28/2023

 

5 For each performance-based RSU award unearned and not vested at December 31, 2019, the following table includes the award’s performance period, and the award’s remaining vesting schedule. In 2019, all our NEOs received 50% of their equity award value in performance-based RSUs with a three-year performance period, which if earned, would vest in 2023 and 2024.

 

FOOTNOTE   DATE
CERTIFIED
  PERFORMANCE
PERIOD
START DATE
  PERFORMANCE
PERIOD END DATE
  PERCENTAGE OF
OUTSTANDING
  VEST DATES
5a   Feb-2020   January 1, 2019   December 31, 2019   20%   2/28/2020   2/26/2021   2/28/2022   2/28/2023   2/28/2024
5b       January 1, 2020   December 31, 2022   50%               12/8/2023   12/10/2024

 

6 Mr. Sharps and Mr. Veiel received time-based restricted stock awards that were not vested at December 31, 2019. Additionally, all our NEOs received 50% of their 2019 annual equity award value in time-based RSUs that vest over three years beginning in 2020. The following table represents the vesting schedules of the outstanding stock awards at December 31, 2019.

 

FOOTNOTE   REMAINING
PERCENTAGE VESTING
  VEST DATES
6a   100%   12/10/2020            
6b   50%   12/10/2020   12/10/2021        
6c   33%   12/10/2020   12/10/2021   12/9/2022    
6d   25%   12/10/2020   12/10/2021   12/9/2022   12/8/2023
6e   33%   12/10/2020   12/10/2021   12/9/2022    

 

52 T. Rowe Price Group
 

Table of Contents

2019 Options Exercises and Stock Vested Table

 

The following table shows aggregate stock option exercises and restricted stock awards vesting in 2019 and the related value realized for each of the NEOs.

 

    OPTION AWARDS   STOCK AWARDS
NAME   NUMBER OF SHARES
ACQUIRED ON EXERCISE1,6
  VALUE REALIZED
ON EXERCISE2
  NUMBER OF SHARES
ACQUIRED ON VESTING3,6
  VALUE REALIZED
ON VESTING3
William J. Stromberg     60,382   $ 2,932,876     16,352   $ 1,847,775
Céline S. Dufétel       $     884   $ 88,780
Robert W. Sharps     19,064   $ 930,822     48,0794   $ 5,751,1214
Christopher D. Alderson     141,363   $ 5,635,644     13,617   $ 1,581,712
Eric L. Veiel     41,636   $ 1,658,443     24,1235   $ 2,951,4495

 

1 Represents the total number of shares underlying the exercised stock options.
   
2 Computed using the difference between the market price of Price Group’s common stock on the date of exercise and the exercise price, multiplied by the number of shares acquired.
   
3 Reflects the number of shares underlying the performance-based RSUs earned and vested. The value realized on vesting is computed using the closing market price per share of Price Group’s common stock on the vest date (December 10, 2019) multiplied by the number of RSUs vesting. The following table shows the aggregate RSUs by NEOs listed in the table above by date of award:

 

DATE OF AWARD   PERFORMANCE PERIOD
COMPLETION DATE
  NUMBER OF SHARES
ACQUIRED ON VESTING
  MARKET PRICE
ON VEST DATE
  VALUE REALIZED
ON VESTING
2/19/2014   12/31/2014     2,250   $ 122.35   $ 275,288
9/9/2014   6/30/2015     2,250   $ 122.35   $ 275,288
2/19/2015   12/31/2015