$3 tn fund launches letter-writing campaign to give shareholders louder voice with directors
Vanguard, the world’s second-largest fund manager, will propose the creation of ‘shareholder liaison committees’ at the companies it invests in starting from January in an attempt to improve corporate governance, according to media reports.
Starting next year, the $3 tn fund will write letters to corporations describing the proposal to create committees that would give shareholders greater access to board members, according to the Financial Times. The committees would give investors more opportunities to express their opinions to directors and suggest issues directors should raise with management.
The fund will start by sending letters to companies in the US in which it holds a stake and then spread the campaign internationally, the newspaper says. Vanguard chief executive Bill McNabb says the fund is concerned that many directors never meet personally with shareholders.
‘Independent directors are doing a good job but we find they are not as engaged with shareholders as they should be,’ McNabb says in an interview with the newspaper. ‘Directors are standing in on behalf of owners – that’s an important concept – yet there are many independent directors who have never met an investor.’
The campaign comes amid a surge in interest in corporate governance and responsible investing that is likely to intensify in the 2015 proxy season. Bank of America Merrill Lynch recently became the first major US brokerage to sign the UN-sponsored Principles for Responsible Investment, the UK’s National Association of Pension Funds announced last week that it will more closely follow sustainability and governance issues in the upcoming proxy season, and a growing number of investor groups are targeting a range of issues from director elections to climate change policy.
At the start of 2014, Vanguard launched another governance-related campaign, sending letters to 350 companies it invests in. In that campaign, each letter was tailored specifically to the company that received it and protested against classified boards, plurality voting in uncontested director elections and other governance-related issues.
