March 20, 2018 / 9:48 PM / a month ago

Vanguard defends proxy powers for small-time shareholders

BOSTON (Reuters) - A push to restrict shareholder resolutions could shut out many small investors with concerns about corporate governance, an executive at asset manager Vanguard Group said.

Higher ownership thresholds could undermine shareholders pushing for changes like annual director elections or independent boards, Glenn Booraem, investment stewardship officer at the world’s largest mutual fund provider, said in an interview.

“Some of the proposed higher limits feel like they all but eliminate the ability of anyone but a handful of shareholders to get proposals out there, which we think would be a step back,” Booraem said.

The comments represented the strongest public defense yet of small shareholders’ right by a top asset manager. Booraem did not rule out supporting some higher thresholds, however.

Along with corporate governance issues, the often non-binding shareholder resolutions have taken on new importance lately with rising investor interest in topics like boardroom diversity or climate change.

Currently shareholders with $2,000 in a major company’s stock can submit proposals to be voted on at its annual meeting, a standard critics say should be rewritten to avoid costly and distracting debates.

Some ideas under discussion, like a bill that passed the U.S. House in June requiring resolution filers hold at least 1 percent of a corporation’s stock, could shut down some activists, said Booraem, speaking on Monday.

The Business Roundtable, an association of chief executives at major U.S. companies, had praised the bill. [nL1N1K91SI]

Booream gave the example of Apple Inc, where 1 percent of shares would be close to $9 billion.

For context, the most prolific resolution filer, private investor John Chevedden, said he often owns around $10,000 worth of company stock.

Pennsylvania-based Vanguard manages more than $5 trillion, largely for retail investors, and holds around 8 percent of shares in a typical S&P 500 company. Vanguard and rivals do not file resolutions but vote on those filed by others, including religious or social groups.

The Business Roundtable’s views have not changed and it supports finding ways to improve shareholder engagement including examining the proposal process and proxy filing thresholds, a spokeswoman said.

State pension fund leaders expect businesses to keep pushing for tweaks like higher ownership thresholds or support levels required to re-file a proposal the following year.

Vanguard also remains concerned about a trend away from equal voting rights, Booream said.

“Shareholders deserve the right for their voice to be heard,” he said.

Reporting by Ross Kerber; Editing by Meredith Mazzilli

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