Vanguard, the pioneer of index investing, saw its assets more than quadruple to $4.5 trillion under Bill McNabb’s leadership amid the accelerating shift from active to passive investment. Embracing the responsibility that comes with such influence, McNabb nudged Vanguard’s portfolio companies towards better governance by encouraging CEOs to articulate their long-term strategies, and IROs, corporate secretaries, senior management and boards to practice proactive "shareholder engagement".
This event was so well-received, we’ve added the audio recording below of the discussion that occurred between Bill McNabb and NIRI President and CEO Gary LaBranche. Click play to listen in (see the question guide below).
NIRI NY Board member Theresa Molloy (Prudential) revisited this popular event in the January/February edition of IR Update.
Click to read:
| Question* |
Time |
| Let’s get into your history and how you’ve gotten to this place… |
00:00 |
| What do you attribute that success to? |
01:16 |
| I read a story that you’re a disciple of Jim Collins, and right around the global financial crisis, you had a senior team retreat with Jim talking about ‘the flywheel concept’. |
06:26 |
| Shareholder engagement is something that Vanguard has been behind in a lot of ways. There’s a story you shared about a portfolio company that didn’t address some concerns in a shareholder proposal, and the proposal failed. They called around their investors and said, “We thought you guys were index funds and wouldn’t care.” Is that changing now? |
13:15 |
| You once said that having an activist is often a symptom that there’s something broken within a company. Where is that tipping point between being passive and being active? |
17:18 |
| When you watch activist battles, what are your expectations of both sides? |
22:22 |
| Some CEOs push back on the concept of allowing directors to engage with shareholders. How would you counsel IR officers and governance officers in that situation? |
26:45 |
| Would you ever be so frustrated with management that you might whisper in the ear of an activist and suggest they take on the issue? |
30:12 |
| Vanguard owns the stocks of 15,000 companies in 68 countries, and cast 171,000 votes last year. How does your stewardship team do it? |
32:21 |
| In your August letter to corporate boards, you focused a lot more on ESG. Why has it become such a high priority? |
34:14 |
| Audience question: What is the process for a company to reach out to Vanguard to start engaging? |
41:29 |
| Audience question: In a world that is going more and more passive, what role do you see for investor relations? |
43:04 |
| What’s chapter two in your career? |
45:25 |
*Questions edited for brevity
Cohosted by the New York Chapter of the Society for Corporate Governance:
