Vanguard CEO Letter
Don’t be dissuaded by common concerns
As with any change in behavior, there may be questions or objections from those who have yet to fully embrace
more significant engagement. That said, we do not believe these should be insurmountable barriers to progress.
Among the perspectives we’ve heard in this regard are the following:
• “Strong shareholder-director engagement will disintermediate management.” This is not what large shareholders seek in an engagement program. Boards often choose to include management for legal support and to discuss operational issues. There are also matters that are the exclusive province of the board (e.g., CEO compensation), which we believe are appropriate for discussion with the board alone.
• “We’ll get tripped up on Reg FD issues.” To be clear, we are not seeking inside information on strategy or future expectations. Rather, we are seeking to provide the perspective of a long-term investor. Individual firms should decide how to manage this risk. You may choose to train directors, include your legal counsel in shareholder conversations, and/or set clear boundaries for discussions.
• “There is no time in our agenda.” Individual boards can decide how much time to allot to engagement. Respectfully, we’d submit that time for engagement with significant shareholders deserves consideration on a board’s agenda. After all, investors are an important constituency whom boards represent.
• “This would be too difficult to implement.” Many companies already have substantive engagement programs in place. The Shareholder-Director Exchange (SDX) Protocol, available at sdxprotocol.com, offers guidance for such programs. This protocol also provides specific considerations for companies that may be concerned about Regulation FD.