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2018 proxy engagements focused on boards, compensation – Vanguard

Board composition and executive compensation were prominent themes in Vanguard's engagements with global companies in the 2018 proxy season, shows the firm's annual proxy-season report released Thursday.

During the 2018 proxy season, Vanguard engaged with 721 companies, in which it had invested a total of $1.62 trillion, or 47% of its total equity fund assets under management, according to the 2018 report. That compares with 954 company engagements, representing $1.138 trillion in AUM in 2017.

Board composition — diversity, skills, tenure and independence — and executive compensation were each discussed in about 50% of the firm's engagements this proxy season.

Vanguard also noted in its report that conversations with company executives around board oversight and risk nearly doubled in the past year.

The firm engaged with three gun manufacturers, and discussed the impact of the opioid epidemic with eight drug manufacturers/distributors/pharmaceutical companies, the report said. Vanguard declined to identify any companies.

The firm also engaged with more than 200 companies in carbon-related industries, the report said.

Companies' governance structures were discussed in about one-quarter of engagements this past year, Vanguard said.

In a letter to Vanguard fund investors at the beginning of the report, Glenn Booraem, investment stewardship officer, wrote that investors "saw no shortage of governance failings this year."

"Numerous companies faced controversies ranging from cybersecurity to unfair systemic business practices," Mr. Booraem wrote.

For 2018, shareholder meetings through June 30, the money manager voted in favor of four of nine shareholder proposals focused on board gender diversity and against 318 members of board compensation committees for failing to respond to shareholder feedback, according to the report. Vanguard also supported 11 of 76 shareholder proposals focused on environmental disclosures, up from two out of 92 in 2017, and supported one shareholder proposal calling for greater risk disclosure by a gun manufacturer.

Vanguard also supported activist investors in five out of 13 proxy contests that went to a vote in the U.S. within the past proxy season, the report said.

Forty percent of this year's engagements included independent board directors — a number that has risen substantially over the years, Mr. Booraem noted in a telephone interview Wednesday.