Vanguard as Activist Innvestor

[almostthere]

http://www.professorbainbridge.com/prof ... vists.html

For the record, I completely disagree with the comments. I may be wrong and I would relish seeing the data that proves me wrong, but I think activist investors have been needed for a long time. Too many boards and managers are only out for themselves. Someone needs to look out for shareholders. If Vanguard can push for best practices to increase value for shareholders, let them have at it.

[IlliniDave]

It's a difficult thing, but the big fund companies as custodians have a duty to vote the fundholders' shares. I guess it depends on what you define as "activism". There's also a tension between what's in the best short-term interest of the shareholders (which is typically the executives' interest) and the long-term best interest of the shareholders. As of about to years ago, among the largest handful of fund companies, Vanguard aligned with board recommendations at a higher percentage than their peers. They claim that they work "face-to-face" with companies regarding governance rather than dissenting with shareholder votes. Sounds weak to me. I think "activism" goes too far and Vanguard's current approach is too complaint.

[Chad]

It has adopted a new approach to push for improvements to compensation practices, board construction, and other corporate issues, says Glenn Booraem, head of its corporate governance efforts.

This part of it is good and what a shareholder/voter should be doing.

Vanguard is now sifting through data, looking for companies that don't adhere to mainstream good-governance principles and then pressing the companies about its concerns.

This part is questionable, as it implies Vanguard brings the "activist" skill to the table. This may be outside their wheelhouse.

In the end, it won't matter for the index fund investors, as the very nature of the index fund prevents the second part from happening in those funds.

[almostthere]

Yes, it probably comes down to what is your definition of activism? If the definition is putting a Vanguard candidate on an underperforming company board, well, that might not be a good idea. However, let's say for example, that data indicates that companies that do not allow the CEO to also be the chairman of the board, tend to perform better. In that case, I would not mind seeing Vanguard have some discussions with firms who are a meaningful portion of the the Vanguard Total Index to get them to institute such a policy.