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Fascinating take from Barron’s, who points out that:
“the largest passive investors aren’t afraid to throw their weight around when it suits them. The industry’s three kingpins are realizing that their investors and clients want to see a bit more action in engaging with management. Vanguard, BlackRock, and State Street together control three-quarters of all the money in passive funds, including 82% of ETF assets. All three have recently bolstered their shareholder engagement teams and made their interactions with management more publicly accessible.”
HISTORICALLY, PASSIVE FUNDS have voted with management far more often than actively managed mutual funds have, says Jackie Cook, founder of Fund Votes, which has been tracking proxy voting for 13 years. In 2016, for example, BlackRock and Vanguard voted with management on compensation-related shareholder proposals 98% of the time, State Street 84%, according to Fund Votes.
Fund firms typically argue that a proxy vote isn’t a good gauge of their activism, but rather, a last resort. Their focus is on behind-the-scenes engagement. “By the time the issue gets to the ballot, shareholders are left with a binary choice,” says Glenn Booraem, who heads Vanguard’s investment stewardship effort. “By having ongoing discussions, we can get into the shades of gray that are often directionally consistent with the shareholder proposal, but better reflect our views.”
But there appears to be an increasing willingness to act when talks don’t progress.”
Great stuff . . .