By: Rachel Curley, Democracy Associate at Public Citizen’s Congress Watch division
At its recent meeting of shareholders, Vanguard heard from Americans concerned about the mutual fund giant’s role in enabling secret corporate spending in our elections.
This was the first Vanguard shareholder meeting since the Supreme Court’s 2011 Citizens United decision that cracked open companies’ abilities to secretly pour money into our politics. This, therefore, was a very important moment to tell Vanguard that it has a critical role to play in bringing transparency to our democracy on top of the responsibility it has to thoughtfully manage its clients’ investments.
Vanguard caught wind of the petition in the press so they knew that we would be delivering it at the shareholder meeting. When I arrived at the meeting in Scottsdale I was taken to meet with the Assistant Secretary of the funds in a small conference room away from the main meeting space. I handed over the printed petitions and explained why so many Americans, including Vanguard clients, are calling on the company to support disclosure. Vanguard assured me that the petitions would be delivered to the investment stewardship team who handles the company’s corporate voting.
In response to a shareholder who asked about Vanguard’s proxy voting record on climate risk disclosure during the meeting, Vanguard CEO Bill McNabb highlighted the company’s Investment Stewardship Report that was released this summer as well as Vanguard’s increased engagements with companies on ESG issues. This acknowledgement from the company’s CEO at the meeting, in addition to the company’s willingness to receive our petition is an encouraging sign that it takes its responsibility to engage with the companies where its clients’ money is invested seriously. However, in his response to the presentation by the proponent for the shareholder proposal on divesting from companies that enable genocide McNabb argued that it is not Vanguard’s role to attempt to change the companies where it is invested. This is counter to the movement on investment stewardship and to Vanguard’s motto of “do the right thing,” and the company needs to realize that it cannot sit passively by on any issue. Calls for Vanguard to change the way it votes its proxies on climate risk disclosure, political spending and lobbying disclosure, and all other ESG issues were echoed by Walden Asset Management at the very end of the meeting.
The more than 27,500 petitions calling on Vanguard to support political spending and lobbying disclosure were collected by Corporate Reform Coalition partners the Sierra Club and Public Citizen, among others.
“In order to ensure every American has access to clean air, clean water, and a safe community, we must have a clean democracy free of secret money polluting our elections, said Courtney Hight, the Director of the Democracy Program at the Sierra Club. “The Sierra Club calls on Vanguard and will continue to call on any group that refuses to free our democracy from the stranglehold of corporate influence.”
“What Vanguard needs to realize is that with great power comes great responsibility,” said Lisa Gilbert, Vice President of Legislative Affairs at Public Citizen. “The mutual fund company has a responsibility to its clients to ensure that public companies it invest in are not using company money to influence politics without making that information available to shareholders.”
Since the detrimental Citizens United decision, which opened up the flood gates for corporations to pour secret money into our elections, shareholders have been putting forth resolutions at major companies asking their companies to be honest about money they spend to influence politics. While more than half of the S&P 100 companies have moved to disclose because of this pressure the resolutions themselves rarely get majority votes. This is because major mutual fund companies like Vanguard control a large percent of voting shares and choose not to use them to support this kind of disclosure.
Vanguard’s voting record on political spending and lobbying disclosure proposals is abysmal. It almost always votes against or abstains from voting for these proposals. A recent Public Citizen report found that if Vanguard alone had changed its voting in 2016 to support the political spending disclosure proposals, overall support for the proposals would have increased 2.48 to 13.68 percentage points and proposals at NextEra Energy Inc. and NRG Energy Inc. would have reached majority support.
Vanguard claims to act solely in its clients’ best interest and to be guided by a simple statement: “Do the right thing.” The recent shareholder meeting was a chance for the company to hear from its investors: the Americans who trust Vanguard with their retirement savings and who are also the company’s shareholders. Vanguard should listen to the over 27,500 petition signers plus the 65,000 Americans who have written to the company in the past and change the way they vote. As the second largest mutual fund in the country and an entity responsible for the retirement savings of so many Americans, Vanguard should “do the right thing” and support political spending and lobbying disclosure.
To read more about the Coalition’s Vanguard work, including an interview supporting political spending disclosure at public companies with Vanguard’s founder, Jack Bogle, visit our campaigns page: www.corporatereformcoalition.org/campaigns