Vanguard became the target of a campaign in November that included 65,000 e-mails asking it to change how it votes on resolutions calling for disclosure of corporate political spending. Neither Vanguard nor BlackRock voted in favor of any such proposals in 2014 or 2015, according to the Washington-based Center for Political Accountability.
“The reason we’re so focused on Vanguard and mutual funds is that they are the holdouts,” said Lisa Gilbert, a director at Public Citizen, which tracks such votes and says that as many as 40 percent of shareholders at some companies support disclosure of political spending. “If they changed their tune, we would see a pretty sweeping majority of votes in support.”
Awkward Position
Vanguard, whose assets have swelled thanks to middle-class investors attracted by its low fees, is in an awkward position: It’s at odds with Jack Bogle, its legendary founder. “We are powerful and we don’t use the power,” Bogle said in a 2014 interview. “I think we should speak up and be active, in things like corporate political contributions.” He described CEO pay in the U.S. as “pretty much out of hand.”
“It’s important to remember that our votes tell only a part of the story, and that we are often able to make more progress through nuanced communication with the company and its board than through a binary proxy vote,” Linda Wolohan, a Vanguard spokeswoman, said in an e-mail.
BlackRock says that being able to talk to boards is its most important tool and that “the key to effective engagement is constructive and private communication,” according to its 2015 corporate governance report. Last year, the company engaged with about 700 U.S. companies, and executive compensation was a focus of 45 percent of those meetings, said Ed Sweeney, a BlackRock spokesman.
“If we determine that issues will not be remediated through engagement, we vote against specific proposals and will generally also vote against the directors on related committees,” Sweeney said in an e-mail. BlackRock voted against 16 percent of management proposals related to pay and against 162 directors serving on compensation committees in 2015, he said. Those figures include votes on adding equity to pay pools in addition to say-on-pay proposals and cover a wider universe of companies than the As You Sow survey.
Fink Pay
BlackRock CEO Larry Fink was paid $25.8 million last year, according to a company disclosure. Vanguard, owned by investors in its funds, isn’t publicly traded, and therefore is not subject to proxy actions. It also doesn’t disclose what CEO Bill McNabb earns.
Silberstein said he doesn’t have high hopes for his proposal, which would require the company to evaluate options for bringing its voting practices in line with its stated principle of linking executive compensation and performance.