Vanguard Group, the second-largest exchange-traded fund provider, is testing a plan to give clients a say in how the firm votes on issues at shareholder meetings.
Vanguard is permitting investors in the Vanguard ESG U.S. Stock ETF (ESGV), the Vanguard S&P 500 Growth ETF (VOOG) and the Vanguard Russell 1000 ETF (VONE) the option to indicate how they would vote on shareholder matters. The mutual fund versions of VOOG and VONE, the Vanguard S&P 500 Growth Index Fund and the Vanguard Russell 1000 Index Fund, are also included in the plan.
The program started Feb. 1 and runs through June 30, Malvern, Pennsylvania-based Vanguard said in a statement.
With $2.01 trillion across 81 ETFs, Vanguard says investors will participate in deciding how the fund votes on ballot items “for certain of the fund’s largest holdings, proportionate to their ownership in that fund.”
The plan follows a similar experiment with proxy voting at BlackRock Inc., whose iShares arm is the No. 1 ETF issuer, and comes after criticism from academics and investors that big asset managers wield outsize influence over public companies’ voting matters.
“Shareholder investment is increasingly concentrated in passively managed index funds, ETFs, and large mutual fund families,” according to a paper from the Harvard Law School Forum on Corporate Governance published Jan. 30. This is resulting in “further removing individual shareholder preferences in corporate governance from the proxy process.”
New York-based BlackRock is experimenting with a program that would let fundholders choose how shares are voted at annual meetings, Bloomberg News reported Jan. 24, citing people familiar with the matter. BlackRock, whose chief executive Larry Fink has called for a new period of “shareholder democracy,” is working with unnamed wealth firms in the U.K., Bloomberg said.
Proxy voting is typically done when a shareholder is unable to vote in person at a shareholder meeting. Matters typically include election of board members, executive pay, approval of the auditor as well as shareholder proposals.
Vanguard, which has $7.2 trillion in assets, said the pilot program is available to clients whether the funds are held directly through Vanguard or through another firm.
Contact Ron Day at [email protected]