Vanguard is doubling the scope of its initiative to give retail shareholders more influence over proxy voting, including an option to prioritise profits above all else. Nearly 4 million investors, controlling up to $250 billion in US company shares, can now select from five voting options. These include letting Vanguard decide, aligning with company management, emphasising environmental, social, and governance (ESG) factors, voting “present,” or prioritising profits over politics.
This expansion comes as Vanguard and other large asset managers navigate a conservative backlash against ESG investing while maintaining support from clients committed to climate change and social equity. John Galloway, Vanguard’s global investment stewardship officer, explained, “It’s a response to feedback from investors. Investors have different perspectives on what they believe maximises shareholder value.”
The Pennsylvania-based asset manager, which oversees $10.1 trillion in assets, faced criticism earlier this year for rejecting all environmental and social shareholder proposals on US ballots. Conservatives have accused Vanguard and its peers of promoting “woke capitalism” through their substantial shareholdings in American companies.
In the upcoming proxy season, eight Vanguard funds will offer voting choice options, up from five in the previous year. However, the programme does not yet include Vanguard’s largest funds, such as those tracking the S&P 500 and the total US market. Vanguard is also working to extend voting options to investors holding shares through retirement accounts, potentially broadening participation significantly. According to the Investment Company Institute, three times as many US investors access mutual funds through retirement accounts compared to other channels.
Rivals BlackRock and State Street Global Advisors (SSGA) are also advancing similar initiatives. BlackRock’s Voting Choice programme, which began with institutional clients, now includes individual investors. It offers 16 voting policies, with $634 billion—or roughly a quarter of eligible $2.8 trillion equity assets—currently assigned by shareholders. SSGA’s programme, covering $1.7 trillion in assets, provides 10 voting options and includes all US-based index mutual funds investing in American equities.
The push for shareholder voting choice coincides with increased regulatory scrutiny. The Federal Deposit Insurance Corporation (FDIC) is evaluating additional oversight for index fund managers like Vanguard and BlackRock, whose funds often hold over 10% stakes in US banks. SSGA, as part of custody bank State Street, is already subject to banking regulators’ supervision.
Despite these efforts, the impact of the voting programmes on regulatory and public criticism remains uncertain. Nearly half of Vanguard investors who participated in the programme have opted to let the fund manager use its discretion in voting.