UK - The Local Authority Pension Fund Forum (LAPFF) is urging its members to take action against T.Rowe Price as it is concerned that remuneration packages for executives are "not serving shareholders' interests".
T.Rowe Price, the US-based financial services firm, is one of 15 companies on a "global focus list" compiled by the LAPFF in which it claimed "poor compensation practice and poor performance in other core corporate governance areas are cause for concern over these companies' abilities to generate sustainable returns in the long-term".
The US firm is the first company on the list to be tackled, and the LAPFF is calling on its 49 public sector pension fund members to "withhold their support for the members of the compensation committee" ahead of T Rowe Price's annual meeting on 8 April.
In particular, the forum has raised concerns about the rewards to executives under the long-term compensation scheme as they are not required to meet performance targets except continued service, and there are additional concerns about the "opacity of performance criteria used under the annual bonus scheme".
Councillor Ian Greenwood, chairman of the LAPFF, contacted Donald Hebb Jr, chairman of the compensation committee at T.Rowe Price in February to outline these concerns, arguing the existing executive compensation practices "are not servicing shareholders' long-term interests".
While the LAPFF admitted Hebb had replied in detail to the concerns, "the fundamental problems remained unaltered", so the forum had decided to take action ahead of the AGM later this week.
The organisation, whose members have combined assets of £75bn (€82.7bn), claimed in the current economic situation there is a need to ensure company management has a "clearly defined approach to long-term sustainable value creation", and warned the establishment of incentive schemes with appropriate rewards for manager performance is "fundamental to this".
"The Forum cannot support incentive schemes that reward executive directors merely for being there," said Greenwood.
"Setting specific performance targets that are aligned with the company's strategy is imperative, especially in difficult times, to appropriately measure how executive directors perform.
"We cannot assume that their presence alone is enough to tackle the challenges that financial companies in particular will face in the near future," he added.
A spokesman for T.Rowe Price told IPE that the board "looks very closely at aligning executive compensation with the interests of our shareholders", and said it uses both short and long-term factors to link both the cash compensation and stock incentives to overall corporate performance.
He said the company has set out a series of performance targets and suggested the compensation programme rewards short-term success in the context of long-term performance as 2008, for example, was a "very difficult" year and bonuses for top executives were "reduced significantly" as a result.
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