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Proxy advisers back Vanguard, smoothing path in fund votes

Published 11/09/2017, 03:42 PM
Updated 11/09/2017, 03:50 PM
© Reuters.  Proxy advisers back Vanguard, smoothing path in fund votes

By Ross Kerber

BOSTON (Reuters) - Proxy advisers Institutional Shareholder Services and Glass Lewis & Co each recently backed Vanguard Group Inc's management on fund trustee nominees and administrative items set for a rare shareholder vote next week, according to recommendations seen by Reuters.

Both major proxy advisers recommended investors vote in favor of all 12 candidates for board seats overseeing Vanguard's funds, including Tim Buckley, set to become Vanguard chief executive on Jan. 1. The recommendations are a strong move in support of the nominees, since institutional investors often follow proxy adviser suggestions.

ISS and Glass Lewis also recommended investors back five other company proposals dealing with matters like making it easier to hire and fire investment advisers, and both recommended votes against a shareholder proposal seeking to limit Vanguard's investments in companies tied to genocide or crimes against humanity.

ISS did, however, back the human-rights proposal in specialized guidance to certain investors.

Mutual funds are rarely required to hold shareholder meetings, making Vanguard's event scheduled for Nov. 15 in Scottsdale, Arizona, an unusual chance for investors to voice their views.

Analysts say Vanguard's main challenge will be to get a quorum of investors to cast ballots by phone, mail, online or in person to avoid the expense of further meetings.

Vanguard spokeswoman Arianna Stefanoni Sherlock said via e-mail the support from the proxy advisers is "helpful to the extent that institutional clients look to their recommendations." She declined to give an update on the progress of balloting beyond a count Vanguard gave in September that about a third of funds had reached quorum at the time.

Eric Cohen, chair of Investors Against Genocide, the sponsor of the shareholder resolution at Vanguard, said the group hopes to get a higher level of support than the 17.3 percent a similar proposal received at Vanguard shareholder meeting in 2009. Cohen said more specialized guidance from ISS could boost support.

In addition to its well-known "benchmark" recommendations, ISS provides guidance to investors focused on areas like sustainability and socially responsible investing. An ISS spokesman confirmed the proxy adviser's specialty policies in those areas recommend investors support the shareholder resolution by Cohen's group.

Among other things, ISS' specialized guidance states shareholders would benefit from fund leaders "carefully monitoring its investments from a reputational standpoint."

Vanguard trustees oppose the proposal, saying its funds comply with U.S. laws and that the issues involved require diplomatic and political attention.

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