Vanguard Group is taking a more active approach to
monitoring companies in its portfolios.
The asset manager engaged with 954 companies this year,
jumping 39 percent from 685 companies in 2015, according to the
firms Investment Stewardship 2017 Annual Report
released Thursday. The number of companies Vanguard invested in
remained stable over the period.
The firms increasing engagement is notable because
its an exchange-traded fund manager focused on ordinary
investors. While activist hedge funds regularly shake up
corporate boards, Vanguard has made a name for itself providing
low-cost, passive index funds.
When a company has a great board of directors, good
results are more likely to follow, Vanguard Chief
Executive Officer Bill McNabb said in an announcement about the report. A
strong board comprises diverse, experienced directors that
serve as our eyes and ears on risk.
Vanguard said in its report that the firm has seen a
significant increase in the number of proxy contests and
contentious transactions at the companies it has engaged with
Engagements are a critical part of our approach to
stewardship, the firm said in the report. Some
engagements were issue-related or event-driven, while others
focused on gaining a deeper understanding of a boards
role in a companys overall strategy.
Vanguard is voting in more proxy contests. The firm voted on
171,385 proposals this year, up 39 percent from 2015, according
to the report. Most of its votes were on board nominees and
corporate matters, including proposals tied to capitalization
and mergers and acquisitions.
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We continue to address traditional governance issues,
such as misaligned compensation practices, unequal shareholder
voting rights and ineffective boards, Glenn Booraem,
Vanguards investment stewardship officer, said in the
announcement. Increasingly, weve taken stronger
positions on emerging topics, including gender diversity on
boards and climate risk disclosure.
During the 2017 proxy season, or the 12 months through June,
contests and contentious transactions were a prominent
issue representing 16 percent of Vanguards company
engagements, according to the report.
The firm noted that it evaluates activist situations on a
case by case basis, and requires that activists make a
strong strategic case for changes at a company in
order to vote in its favor.
You can expect us to speak out to serve as a voice for
our clients, and to protect and further their economic
interests, Booraem said.