Vanguard advocates for governance best practices in new Investment Stewardship letter and report
Vanguard | 01 September 2017
In a letter today to public companies, Vanguard Global CEO Bill McNabb affirmed the key elements of the firm's approach to investment stewardship, an increasingly important area of focus given Vanguard's considerable company ownership in both its index and active funds.
In addition to highlighting the long-term perspective that guides Vanguard's stewardship efforts, the letter outlined four pillars of corporate governance evaluation: board composition, governance structures, appropriate compensation, and risk oversight; and emphasised the importance of gender diversity on boards, climate risk disclosure, and ongoing engagement and dialogue with companies.
“Our investors depend on Vanguard to be a responsible steward of their assets, and we promote principles of corporate governance that we believe will enhance the long-term value of their investments,” said Mr. McNabb.
“When a company has a great board of directors, good results are more likely to follow. And a strong board comprises diverse, experienced directors that serve as our eyes and ears on risk.”
Vanguard's Investment Stewardship group also today released its annual report, which details the results of Vanguard's 2017 proxy voting efforts and, for the first time, includes expanded commentary and engagement case studies.
Vanguard conducted nearly 1,000 global engagements in the past twelve months, which took the form of in person and virtual meetings with directors and management. Many of these engagements came as a result of the analysis done by Vanguard's Investment Stewardship team as the funds' voted on ballot measures, which totalled more than 170,000 discrete items in 2017.
“You can expect us to speak out to serve as a voice for our clients, and to protect and further their economic interests,” said Glenn Booraem, Vanguard's Investment Stewardship Officer.
“We continue to address traditional governance issues, such as misaligned compensation practices, unequal shareholder voting rights, and ineffective boards, and increasingly, we've taken stronger positions on emerging topics, including gender diversity on boards and climate risk disclosure.”
“Our evolving position on climate risk, much like our stance on gender diversity, is based on the economic bottom line for Vanguard investors,” said Mr. McNabb.
“As significant long-term owners of many companies in industries vulnerable to climate risk, Vanguard investors have substantial value at stake.”
The report also details Vanguard's progress and advocacy in industry groups, including as a member of the 30% Club, a global organisation that advocates for greater representation of women in boardrooms and leadership roles; as a signatory to the Principles for Responsible Investment (PRI), to which Vanguard recently submitted its first Transparency Report; as a member of the Investor Advisory Group to the Sustainability Accounting Standards Board (SASB), where Vanguard works with other market participants who recognise the need for disclosure of material sustainability-related information; and as a founding member of the Investor Stewardship Group, a collective of some of the largest U.S.-based institutional investors and their global counterparts.