Asset managers have sought ways to transfer responsibility for
voting to individual shareholders amid controversy over ESG
initiatives © AP
|
Madison
Darbyshire
in
New
York SEPTEMBER 17 2024
Vanguard gave investors in a handful of its
funds the chance to vote their shares last year, part of a
revolutionary push to give people a say in the governance of America’s
largest companies.
Instead, almost half of investors opted to let
Vanguard do it for them after all.
Nearly 45 per cent of shareholders chose to
let the $9.7tn asset manager vote their shares, data shows, the
default option for
investors who have not been offered the chance to vote their
shares at all.
The move comes as the largest index investment
providers deal with political pressure from both the left and right
for the amount of control they have over US companies through the
assets they manage. Critics contend the index firms have too much
power because they control 15 per cent to 20 per cent of shares in
many US-listed companies.
As the political backlash to environmental,
social and governance shareholder initiatives has intensified, asset
managers have rushed to find ways to transfer responsibility for
voting to individual shareholders in their funds, whom they previously
voted on behalf of. BlackRock and State Street also recently launched
programmes to allow some individual investors to vote their shares.
The firms already gave some institutional investors the ability to
choose how their shares were voted.
But many investors have shown they are happy
to let their investment firms speak for them.
“It is a data-driven answer to the question
that some have raised about, ‘What do investors actually want?’ and
‘Is it appropriate that the asset manager is picking how their shares
are voted?’,” said John Galloway, global head of investment
stewardship at Pennsylvania-based Vanguard, who heads the proxy pilot
programme. The data shows that for many investors, “that seems totally
appropriate because they are choosing to pick that same policy”.
Vanguard’s policy for voting shares is clear
and supports measures that create value for shareholders, Galloway
said. It’s “gratifying to see that policy is something that resonates
with investors”.
The Vanguard pilot programme, launched in
early 2023 and expanded this year, allowed investors in five funds to
participate in proxy voting on company proposals. Investors in the
funds with more than $100bn in combined assets could select blanket
voting options such as to abstain, vote with an ESG focus, vote
alongside the company’s board or allow Vanguard to vote their shares.
Participation in the programme was voluntary.
Nearly a quarter of the 40,000 retail
investors in the programme voted to support ESG shareholder proposals,
according to the data, while 30 per cent opted to vote in line with
the recommendations of company boards. But the largest number of
investors chose to vote their shares in line with Vanguard’s
recommendations, the way their shares were voted before the programme.
“The fact that the retail investors opted to
allow Vanguard to vote their own shares is quite meaningful . . . it
shows they value the decision-making practices that their
institutional investors adopt with regards to these issues,” said
Matteo Tonello, the managing director of ESG research at The
Conference Board, a US think-tank.
The individual proxy voting initiatives were
largely a response to the heavy politicisation of ESG in the US, as
asset managers came under fire and politicians questioned the ability
of asset managers to vote in a way that was representative of the
interests of their underlying shareholders.
“The next time Republicans complain about
non-representative corporate democracies, the asset managers are going
to turn around and say look at the data,” said Shiva Rajgopal, a
professor at Columbia Business School.
Copyright The Financial Times
Limited 2024. All rights reserved.