A lot of people are talking about the results recently posted by Vanguard from the first year of its pass-through voting pilot program. Many understandably want to read the tea leaves as indicating that “investor choice” voting on a widespread scale could alter the dynamics of the proxy season.
Did the results surprise me? Overall, I don’t think so. I’m not convinced that they look much different than what I would have guessed. Of course, that’s easy for me to say after the fact.
While people are focused on the headline numbers showing that nearly half the shareholders participating in the pilot program chose the Vanguard voting policy, what is missing from the discussion is the overall participation rate, which according to this fact sheet was pretty low.
According to Vanguard, their “Investor Choice” pilot program was offered to nearly two million individual investors this year, and only approximately 40,000 – representing 2% of the shareholders eligible to participate – chose to participate. I’m not a statistician, but that doesn’t strike me as statistically significant. It’s not a clean analogy but I can’t help thinking about broker’s mirror voting (i.e. proportional voting on routine matters for uninstructed shares).
What would really change the playing field? If Vanguard – or another major investor – either mandated that investors make an election, so that pass-through voting was the default – or a major investor applied some sort of mirror vote to those retail holders that made an election. If any of Big Three investors were to adopt one of these policies, I imagine it would have a dramatic impact on voting results…
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