Vanguard on Corporate Governance

It is great to see an article in the WSJ from John Brennan, chairman emeritus of Vanguard on Improving Corporate Governance: A Memo to the Board (5/10/10).  Brennan says boards are improving and offers several bits of advice to keep the momentum going:

1) Know that you are the shareholders’ first line of defense.
2) Build value through mutual respect.
3) Communicate. Great boards of directors listen and hear.
4) Measure your success. Great boards are self-reflective and self-evaluating.
5) Compensate yourselves in equity.
6) Share your metrics.
7) Hold yourselves accountable.
8) Establish an “owner’s relations committee.”

Great to see a representative of Vanguard speaking out about the importance of corporate governance. I’m delighted to learn that largely passive investor Vanguard “hardly takes a passive approach to corporate governance.” Much good advice and I’d love to see Vanguard take it as well.

However, when I look at their voting track record on I see, for example, the Vanguard 500 fund only voted against management twice on Board Independence and Performance proposals out of 235 times. If they really take corporate governance and voting seriously, why not announce those votes in advance on sites like and If their votes really are thoughtful, retail investors will follow their lead. It looks to me like they need to put a little more thought into proxy voting. (Hat tip to Martin Robins for bringing the article to my attention.)

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