Last week, as noted in this press release, Vanguard settled antitrust challenges from a group of 13 state attorney generals by agreeing to pay $29.5 million and bolster its passive investing approach. The suit had been brought in the U.S. District Court in the Eastern District of Texas over Vanguard’s climate policies. As noted in this blog, the DOJ and FTC also have been pressuring Vanguard (as well as BlackRock and State Street, which are still fighting the lawsuit) over its policies. See this WSJ article and Reuters article.
Here are two items from the settlement that we thought were particularly interesting:
- Vanguard will include among the proxy voting choices made available to investors in U.S. Vanguard-Advised Funds the option of proxy voting shares in accordance with management recommendations.
- Prior to – or at the outset – of any engagement meeting with a portfolio company, Vanguard will provide substantially the following notification to the portfolio company:
Vanguard’s Investment Stewardship program is responsible for proxy voting and engagement on behalf of the quantitative and index equity portfolios advised by Vanguard. These funds are passive investors, and as such our funds’ proxy voting policies are centered around corporate governance practices associated with long-term investment returns. Before we begin this engagement, we want to be clear that the Vanguard-advised funds have no intent to influence company strategy or operations or the control of the company.
Nothing we mention or discuss during this conversation – or any engagement with [the company] – is intended to imply that our support for any director is conditioned upon the company taking action on any matter discussed. We are also not able to discuss any voting intentions prior to the meeting.
And here’s an excerpt from this statement issued by Vanguard that notes its use of voting choice: “The terms of the agreement to settle this litigation reaffirm our longstanding practices and standards and the passive nature of our index funds. The settlement also recognizes our innovative Investor Choice program as a tool for empowering investors and bringing new voices into the proxy voting ecosystem. Investor Choice is the largest proxy voting choice program in the world, empowering 20 million index fund investors across more than $3 trillion in assets to make their voices heard.”
Authored by
Broc Romanek