April 5, 2017
Mutual Fund Giant Vanguard Updates Its Proxy Voting Guidelines on Environmental and Social Issues
The Company Is Under Pressure to Change Its Voting Habits
WASHINGTON, D.C. – Vanguard mutual funds recently took a small but positive step toward encouraging corporate accountability for its investors by updating its guidelines of how it votes its proxies, Public Citizen said today. Vanguard’s update, particularly on shareholder proposals on environmental and social issues, could be the first outward step to increase accountability for large investment management funds and bolster corporate transparency around political spending.
Instead of asserting as in the past, that the decision to disclose or change a company’s business practices “should be the province of company management unless they have a significant, tangible impact on the value of a fund’s investment and management is not responsive to the matter,” Vanguard updated its guidelines to stipulate that “the funds will evaluate each proposal on its merits and may support those where we believe there is a logically demonstrable linkage between the specific proposal and long-term shareholder value of the company.”
Vanguard and other large mutual funds have increasingly faced pressure from clients, the press, watchdog groups, investors and others to reevaluate their proxy voting habits because of the significant stake they own in the country’s largest companies.
Public Citizen and its allies have been calling on Vanguard, for more than two years, to change its voting practices and policies. Last year, more than 65,000 prospective and current Vanguard customers wrote to the mutual fund company asking it to support disclosure of political contributions by companies. The groups believe Vanguard has an obligation to be good stewards of clients’ retirement savings.
“As one of the largest managers of retirement savings in the country with incredible ownership stakes in the stock market, Vanguard has a responsibility to do everything it can to encourage corporate transparency and accountability,” said Rachel Curley, democracy associate at Public Citizen’s Congress Watch division. “As one of the companies that in the past consistently voted against important social and environmental resolutions, Vanguard should use this opportunity to not simply change policy language but also change its voting habits.”
Vanguard has consistently voted against or abstained from voting for political spending disclosure shareholder proposals, citing that sufficient impact on shareholder value is not established. In reality, shareholders are calling for disclosure because they do not know how a company’s political spending affects value if that spending occurs in secret.
“As long as political spending goes undisclosed, we will never be able to fully establish its impact on shareholder value,” said Lisa Gilbert, vice president for legislative affairs at Public Citizen. “Vanguard should look out for its clients’ interests by supporting the shareholder call for access to material information such as a company’s political spending.”
Thirty political spending disclosure shareholder proposals are up for vote at public companies in the 2017 proxy season. Vanguard should vote in favor of these resolutions at every company where it holds shares, Public Citizen maintains.