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Vanguard Campaigns for Investor Votes as Shareholder Meeting Nears

Index fund giant Vanguard faces a special challenge this proxy season as the firm prepares for its November shareholder meeting to elect trustees and vote on other proposals. Reuters reports that Vanguard is spending $17.6 million to solicit votes by mail, phone and electronically.Vanguard’s passive investors are considered more hands-off and thus less likely to respond to vote requests. One proposal that has resurfaced in Vanguard’s and other firms’ proxy materials was initiated by activist group Investors Against Genocide and seeks to limit firms’ investments in companies that substantially contribute to genocide, crimes against humanity or violations of human rights. The Vanguard Board recommends a vote against the proposal. Index funds are thought to have less meaningful information on the thousands of individual companies that indexes invest in -- as opposed to funds run by traditional active managers. However, as index funds continue to dominate the industry, large asset managers like Vanguard and BlackRock have increased their involvement in corporate governance. Vanguard recently released its proxy votes for 2017 and a report from its Investment Stewardship Group describing, among other things, Vanguard’s philosophy on voting -- including voting against management on certain issues. Vanguard’s board recently supported two climate-related shareholder resolutions that were opposed by company management, according to a Financial Times report. Vanguard Chairman William McNabb in a letter to directors of public companies reiterated the firm’s core principles, stating that Vanguard’s “focus on corporate governance and investment stewardship has been and will continue to be a deliberate manifestation of Vanguard’s core purpose: ‘To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success.’ Our four pillars and our increased focus on climate risk and gender diversity are not fleeting priorities for Vanguard.”

Meanwhile, proxy advisory services firm ISS has been acquired by Genstar Capital for $720 million, according to PI Online. ISS was last acquired in 2015 by another private equity firm. ISS has about 3,000 clients, including pension funds and other institutional investors. ISS is expected to continue to operate independently and to retain its name after the close of the transaction.