T. Rowe Price: What Investors Need To Know About Its Executive Compensation Plan
Jun. 25, 2015 4:46 PM • trow
- T. Rowe Price's executive compensation scheme relatively complex.
- Total compensation of named executive officers modest compared to industry peers.
- Although base salaries are low, executives would receive significant amounts of available bonuses except in an extreme catastrophe.
Is T. Rowe Price (NASDAQ:TROW ) being run for the benefit of its shareholders or its management? One way to find out is by looking at how its top executives are compensated. The trouble is, navigating proxy statements for the information you need to evaluate the compensation committee's actions isn't always straightforward. In my experience nearly every company claims to pay for performance. Upon closer examination this isn't always the case.
Although executive compensation adds up to less than two percent of T. Rowe's operating income, it is a critical part of my due diligence process. All too often improperly compensated executives lack proper incentive
to increase shareholder value. In extreme cases, management can exert far too much influence on board members causing shareholders to suffer. For dividend growth investors with a long-term time frame it's vital you choose companies with executives whose goals are aligned with its buy and hold investors.
Strong competitive advantages, and impressive dividend growth lifted T. Rowe Price to first place in the Moaty Chowder rankings. Let's take a look at the different ways it compensates its top executives to see if the company can be expected to perform for our dividend growth portfolios.
My favorite way to begin evaluating a company's executive compensation program is a basic peer comparison. While market leaders typically have CEOs that are paid slightly more than their industries, the majority of executives should be paid on par with their peers. You can see below that T. Rowe pays less in base salary than its peers. What you don't see is that all five NEOs receive the same base salary of $350,000.