Vanguard 2024 Proxy Voting Guidelines - What's New?

Introduction

Vanguard, one of the world’s largest asset managers, recently published its 2024 Global Proxy Voting Policy, as well as 7 separate Regional Voting Policies. In this article, AQTION takes a look at the key changes to Vanguards Europe and UK policies.

General Stewardship Approach: 

The majority of Vanguard’s core stewardship principles remain largely unchanged, however, emphasizing on a long-term perspective, Vanguard has strengthened its expectations on 'board responsiveness', stating that “Policies are applied over an extended period of time; as such, if a company’s board is not responsive to voting results on certain matters, the funds may withhold support for those and other matters in the future”.  

Vanguard outlined their focus topics in their Global Proxy Voting Policy, which reflect the four broad themes of:

1. Board Composition and Effectiveness
2. Board Oversight of Strategy and Risk
3. Executive Pay (compensation or remuneration)
4. Shareholder Rights

1. Board / Committee Independence:

Vanguard clarified its general expectation for  a majority of independent directors and committees, opposing non-independent nominees if the board composition does not meet its independence criteria.

Vanguard will also be more vigilant on directors’ independence assessment, notably in the case of a former CEO that would be considered permanently non-independent, unless they have served in an interim capacity for less than 18 months.

2. Leadership: 

Vanguard supports independent board leadership, advocating for either an independent chair or a governance that includes a Lead Independent Director with “sufficiently robust authority and responsibilities”.

3. Board Composition:

Greater disclosure on directors' tenure, experience, and skills is expected individually, not in aggregate. Enhanced disclosure on board evaluation and a robust nomination process for a diverse skill mix aligned with the company's long-term strategy are also anticipated.

4. Director & Committee Accountability:

Vanguard reinforces its expectations, holding directors accountable when the board fails to respond to actions approved by a majority of shareholders or fails in its oversight role.

Gender diversity is no longer a specific accountability criterion and was replaced by “Board composition concerns”.

5. Share Issuance Requests: 

Vanguard clarified they will consider any rationale when share issuance requests exceed thresholds.

While expected thresholds for authorisations with and without preemptive rights remain unchanged for European markets (50% and  20% respectively), Vanguard increased their accepted thresholds for companies in the UK: up to 50%, and an additional 50% with preemptive rights, provided that it is applied fully to a preemptive rights issue and that the authority is for 15 months or less (vs. 33% previously) and up to 10% or 20% without preemptive rights, provided that the additional 10% is applied to acquisitions or other specified capital investments only and that the authority is for 15 months or less (vs. 5% and 10% previously).

6. Remuneration: 

Vanguard compares executive pay to peer companies, expects a clear remuneration strategy, and considers "yellow flags" for compensatory effects between performance metrics. Importantly, it states that unusual practices can be mitigated with strong disclosure and compelling rationales.