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Investment stewardship 2017: How Vanguard advocates for investors

01 September 2017 | Topical insights

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Investment stewardship

In our recently published Investment Stewardship report, we detail our advocacy, engagement and proxy voting efforts on behalf of Vanguard fund investors over the past year. The report describes our ongoing engagements with portfolio company directors and leaders on behalf of investors and also summarises the proxy voting record of Vanguard funds at thousands of corporate shareholder meetings for the 12-month period ended 30 June 2017.

In an open letter to the boards and senior leaders of the publicly traded companies worldwide, Vanguard Chairman and CEO Bill McNabb outlines key focus areas of our Investment Stewardship programme, including the following:

  • High-functioning, well-composed, diverse boards of directors.
  • Good governance structures, with directors standing for election annually.
  • Performance-linked compensation policies.
  • Effective and integrated risk oversight that is communicated to shareholders.
  • Ongoing engagement between boards and shareholders.

Our Investment Stewardship team

Vanguard's Investment Stewardship team advocates for responsible corporate governance practices at companies in which the Vanguard funds invest. The team is made up of an experienced group of senior leaders and analysts who are responsible for company engagement and proxy voting on behalf of the Vanguard funds.

The team supports effective corporate governance in three ways:

  • By advocating on issues and policies that we believe will enhance the sustainable, long-term value of clients' investments.
  • By engaging in "quiet diplomacy focused on results", which in our view will better position companies to deliver long-term progress over short-term gain.
  • By voting proxies at company shareholder meetings across each of our portfolios and around the globe.

Our process is iterative and ongoing, and it has led to nearly 1,000 engagements with almost 700 companies during the 12-month period covered by the report. Over the same time period, Vanguard funds cast proxy votes at approximately 18,900 shareholder meetings (covering more than 171,000 individual ballot items across 67 countries).

"Our Investment Stewardship team serves as a voice for investors," noted McNabb. "Our programme is grounded in the belief that great governance helps promote and sustain long-term value for our funds' shareholders. The ongoing engagement with portfolio companies is one way in which we serve investors' interests."

Investment Stewardship Officer Glenn Booraem added that this year has been an important time in the evolution of the programme. "You can expect us to speak out when we detect threats to our shareholders' economic interests. Increasingly, you'll also see us take more public positions on select governance topics such as climate risk disclosure and gender diversity on boards. Our team and our views have continued to evolve, but our focus on the long-term interests of Vanguard shareholders remains unwavering." This year's expanded annual report is part of the team's plans to create more comprehensive reporting on Vanguard's Investment Stewardship programme.

"Our focus on corporate governance and investment stewardship has been and will continue to be a deliberate manifestation of Vanguard's core purpose," noted McNabb in the letter. "Because we are essentially permanent owners of [most publicly traded companies], we are obligated to be active stewards."

More updates about Vanguard's Investment Stewardship programme can be found in the annual report.

Important information:

This article is for professional investors as defined under the MiFID Directive only. In Switzerland for institutional investors only. Not for public distribution.

The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

The opinions expressed in this article are those of the individual author and may not be representative of Vanguard Asset Management, Limited or Vanguard Investments Switzerland GmbH.

Issued by Vanguard Asset Management Ltd., which is authorised and regulated in the UK by the Financial Conduct Authority. In Switzerland, issued by Vanguard Investments Switzerland GmbH.

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