Vanguard's newly released U.S. Regional Brief, which captures its US-specific investment stewardship activities for the 12 months ended June 30, in many ways mirrors the takeaways we reported last week from BlackRock’s annual voting report in terms of Vanguard’s steep decline in support for environmental and social shareholder proposals due to their prescriptiveness, micromanagerial nature, and/or the fact that companies had already substantially implemented the proposals’ requests.
More broadly, like BlackRock, Vanguard noted the significant rise in the volume of subpar quality proposals, attributed in large part to the SEC’s SLB No. 14L issued in November 2021:
The recent changes limited companies’ ability to exclude proposals under the rule’s “ordinary business” exception that relate to a significant social policy issue and also limited what may be considered micromanagement” of a company under the exception, contributing to an increase in the number of proposals that may be immaterial at the company in question, direct company strategy or operations, do not provide sufficient discretion to company leadership to act on the proposal’s request, or are otherwise overly prescriptive.
Vanguard also credited companies’ enhanced disclosure of material risks for its reduced support. More robust disclosure facilitated its ability to understand how companies’ practices aligned with proposals’ specific requests, which prompted a determination that, in many cases, the “board had already demonstrated appropriate oversight of the risk and evidenced its oversight through robust disclosure or had practices in place that substantially fulfilled the proposal’s request.”
Notably, Vanguard supported just 2% of 359 environmental and shareholder proposals in the 2023 season, compared to 12% of 290 proposals in the 2022 season. The significant decline in support notwithstanding, the report affirms that Vanguard’s approach to evaluating shareholder proposals has not changed; rather, the quality of the proposal “pool” has declined while the volume of proposals has increased substantially.
The report also recaps Vanguard’s stewardship approach to a variety of discrete topics and shares demonstrative votes from the 2023 season. Its concurrently published Quarterly Key Votes Report (Q2 2023) illustrates Vanguard’s perspective on particular topics