According to a report in the Financial Times this morning, Vanguard is to promote the idea of “shareholder liaison committees” to improve corporate governance. This is of particular significance because Vanguard is one of the largest investment groups in the world and overtook Pimco last year to become the second largest fund manager. Vanguard primarily runs low cost index tracker funds and therefore has to hold all major companies. Indeed they are one of the largest holders of shares in many American companies.
Shareholder committees are something that ShareSoc has promoted also as a step towards better corporate governance and more engagement between shareholders and the directors of companies. See the note downloadable from this web page for how we suggested they might work: http://www.sharesoc.org/policies.html
Bill McNabb, CEO of Vanguard, was quoted as saying: “Independent directors are doing a good job but we find they are not as engaged with shareholders as they should be”. He also complained that many independent directors had never met an investor.
The recent example of BG Group in the UK and their proposals for the pay of the new CEO are surely an example of how there is little dialogue in reality despite the common claims that “major investors have been consulted”. Shareholder committees would be a way to tackle that problem.