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Good Firm to maintain your portfolio with: Article Highlights:
We're permanent shareholders," good times and bad, McNabb said. So Vanguard, the Malvern-based mutual fund giant that manages $3 trillion in assets, feels obliged to pressure bosses to help "create as much wealth for our investors as we can."
McNabb said that earlier this year Vanguard sent messages to 350 companies saying, "Here's something we don't like."......
About 80 companies "have already made the changes" at Vanguard's request this year, McNabb said. "A bunch more are under discussion," he added.
The notion that Vanguard is doing much in the way of corporate activism seems dubious still to me. In the past they've been one of the biggest enablers of corporate excess, rubber stamping almost every pay package for CEOs put before them:afscme.org/news/press-room/press-releases/2011/vanguard-tops-list-of-excessive-ceo-pay-enablers Perhaps that's changed, but I'd like to see more evidence that it has. The line there has always been that they "work behind the scenes" like McNabb says. But that seems a little too convenient, doesn't it? Behind the scenes means there's no real evidence whether they're doing anything or not.
“They owe their clients an explanation for why their assets are being used for CEO pay that does not always match the companies’ performance levels.”
Braham : give me a couple examples of companies where this is happening, and what you think Vanguard can do about employee compensation schedules at major corporations. I would be interested in your concerns/knowledge.
Bay, It is the aggregate numbers that matter more than individual cases, and the last time it was checked Vanguard had one of the worst records of voting for executive compensation and against shareholder proposals to reign that compensation in. But the last time I saw a study on it was for 2011, so maybe that's changed. But because you want examples, here's one: copper miner Freeport-McMoran (FCX)quotes.morningstar.com/stock/s?t=FCX®ion=usa&culture=en-US&ownerCountry=USA. In 2013 CEO Richard Adkerson made $55 million in total compensation: insiders.morningstar.com/trading/executive-compensation.action?t=FCX®ion=usa&culture=en-US aflcio.org/Corporate-Watch/Paywatch-2014/100-Highest-Paid-CEOs#!/search/FCX According to Morningstar, Freeport's stock underperformed other copper miner's for every time period. Nor is it a highly profitable time to be a miner in general, a time when responsible executives should be tightening their belts with lower executive compensation. Vanguard's S&P 500 Fund (VFINX) is one of Freeport's largest holders, yet it voted in its latest proxy to ratify Adkerson's compensation: sec.gov/Archives/edgar/data/36405/000093247114006617/indexfunds0040.htm It also voted against a shareholder proposal to have an independent chairman on Freeport's board. Having a truly independent board is essential to having some control over executive compensation as often the ties of board members are too cozy with that of management and they have conflicts of interest that lead them to overpay their executives. Yet Vanguard often in the past has voted against board independence and for excessive pay packages. And this excessive pay often leads to excessive risk taking by management and stock underperformance studies reveal: papers.ssrn.com/sol3/papers.cfm?abstract_id=1572085 Even worse, as a passive index fund investor, it is incumbent on Vanguard to be as vigilant as possible when it comes to corporate governance because the company must buy and hold no matter how flagrant the abuses of corporate governance and executive compensation at a specific holding. John Bogle himself has been very critical of Vanguard for not being more active in this area. I've actually written about this subject in my book on Bogle. The question is has Vanguard changed its ways. I would like to think so, but until there is firm statistical evidence that its voting record has changed, I find it hard to believe.
Repeat:About 80 companies "have already made the changes" at Vanguard's request this year, McNabb said. "A bunch more are under discussion," he added.... Moving forward...tb
tb - given your reply to LewisBraham's thoughtful response it's no wonder you drink bud light. No doubt he could give you 79 more examples to even up the score but I doubt it would make any difference.
The point is, given Vanguard's size and position, maybe they could do better.
Many would say President Obama but I digress.No one said Vanguard is the exception, However, given that they are the largest shareholder in many companies they are in the best position to effect changes wouldn't you agree and it seems that the general premises of the original article supports that thought.
Saying "shareholder proposals are not in the shareholders interest" is a rather Orwellian remark. I would think shareholder proposals regarding excess executive compensation, which is what the original AFSCME studies measured and found Vanguard lacking, are in everybody's interest, especially shareholders. As I referenced above, studies have shown that stocks of companies with excessive executive compensation tend to underperform their peers. papers.ssrn.com/sol3/papers.cfm?abstract_id=1572085
Comments
Article Highlights:
We're permanent shareholders," good times and bad, McNabb said. So Vanguard, the Malvern-based mutual fund giant that manages $3 trillion in assets, feels obliged to pressure bosses to help "create as much wealth for our investors as we can."
McNabb said that earlier this year Vanguard sent messages to 350 companies saying, "Here's something we don't like."......
About 80 companies "have already made the changes" at Vanguard's request this year, McNabb said. "A bunch more are under discussion," he added.
That's my boys....tb
Perhaps that's changed, but I'd like to see more evidence that it has. The line there has always been that they "work behind the scenes" like McNabb says. But that seems a little too convenient, doesn't it? Behind the scenes means there's no real evidence whether they're doing anything or not.
Braham : give me a couple examples of companies where this is happening, and what you think Vanguard can do about employee compensation schedules at major corporations.
I would be interested in your concerns/knowledge.
It is the aggregate numbers that matter more than individual cases, and the last time it was checked Vanguard had one of the worst records of voting for executive compensation and against shareholder proposals to reign that compensation in. But the last time I saw a study on it was for 2011, so maybe that's changed. But because you want examples, here's one: copper miner Freeport-McMoran (FCX)quotes.morningstar.com/stock/s?t=FCX®ion=usa&culture=en-US&ownerCountry=USA.
In 2013 CEO Richard Adkerson made $55 million in total compensation:
insiders.morningstar.com/trading/executive-compensation.action?t=FCX®ion=usa&culture=en-US
aflcio.org/Corporate-Watch/Paywatch-2014/100-Highest-Paid-CEOs#!/search/FCX
According to Morningstar, Freeport's stock underperformed other copper miner's for every time period. Nor is it a highly profitable time to be a miner in general, a time when responsible executives should be tightening their belts with lower executive compensation. Vanguard's S&P 500 Fund (VFINX) is one of Freeport's largest holders, yet it voted in its latest proxy to ratify Adkerson's compensation:
sec.gov/Archives/edgar/data/36405/000093247114006617/indexfunds0040.htm
It also voted against a shareholder proposal to have an independent chairman on Freeport's board. Having a truly independent board is essential to having some control over executive compensation as often the ties of board members are too cozy with that of management and they have conflicts of interest that lead them to overpay their executives. Yet Vanguard often in the past has voted against board independence and for excessive pay packages. And this excessive pay often leads to excessive risk taking by management and stock underperformance studies reveal: papers.ssrn.com/sol3/papers.cfm?abstract_id=1572085
Even worse, as a passive index fund investor, it is incumbent on Vanguard to be as vigilant as possible when it comes to corporate governance because the company must buy and hold no matter how flagrant the abuses of corporate governance and executive compensation at a specific holding. John Bogle himself has been very critical of Vanguard for not being more active in this area. I've actually written about this subject in my book on Bogle. The question is has Vanguard changed its ways. I would like to think so, but until there is firm statistical evidence that its voting record has changed, I find it hard to believe.
Moving forward...tb
The point is, given Vanguard's size and position, maybe they could do better.
Ted