Vanguard Group released an annual report on its activity in the proxy-voting season ended June 30 and released a letter to public companies outlining the priorities of its investment stewardship group.
In the letter, Vanguard Group CEO F. William McNabb III outlined the "four pillars" of its investment stewardship program: appropriate compensation, board composition, governance structure and risk oversight. He added that "gender diversity is one element of board composition that we will continue to focus on over the coming years" and commented on the money manager's "evolving position" on climate risk disclosure.
"Climate risk is an example of a slowly developing and highly uncertain risk — the kind that tests the strength of a board's oversight and risk governance," Mr. McNabb said in the letter. "Our evolving position on climate risk (much like our stance on gender diversity) is based on the economic bottom line for Vanguard investors. As significant long-term owners of many companies in industries vulnerable to climate risk, Vanguard investors have substantial value at stake."
In its annual report on proxy-voting activity in the year ended June 30, Vanguard disclosed 954 company engagements, up from 817 the year before, representing $1.138 trillion in assets under management invested in the companies, up from $1.004 trillion the year before. Fifty-eight percent of engagements included discussions on governance structures, 55% on executive compensation, 52% on boards of directors (including gender diversity), 16% on activism and contentious transactions, and 14% on risk oversight (including climate risk).
"You can expect us to speak out to serve as a voice for our clients, and to protect and further their economic interests," said Glenn Booraem, Vanguard's investment stewardship officer, in a news release on the annual report. "We continue to address traditional governance issues, such as misaligned compensation practices, unequal shareholder voting rights and ineffective boards, and increasingly, we've taken stronger positions on emerging topics, including gender diversity on boards and climate risk disclosure."
"This past year, we engaged with more companies on this issue than ever before, and for the first time our funds supported two climate-related shareholder resolutions in cases where we believed that companies' disclosure practices weren't on par with emerging expectations in the market," he added in the annual report. Vanguard supported resolutions at Exxon Mobil and Occidental Petroleum.