UChicago academics are publicly calling on index fundsters to abstain from proxy votes. And
Bill McNabb is having none of that.
The
Vanguard [
profile] chief
penned a letter to the editor in today's
Wall Street Journal, pushing back against an opinion piece by University of Chicago Law School professor
M. Todd Henderson and UChicago Law teaching fellow
Dorothy Shapiro Lund that was
published last month (also in the
WSJ). Henderson and Lund claimed that "no passive investor cares much about governance of a particular company" and call for "encouraging passive institutional investors to abstain from voting altogether." McNabb fires back that Henderson and Lund's suggestion "is irresponsible and ill-informed."
"Index fund managers care about good governance more than anyone else," McNabb writes. "We are the ultimate long-term investors because we own stocks forever. Therefore, our vote and our voice on governance are the most important levers we have to protect our clients' investments."
After all, while active fundsters and other investors can "vote with their feet" by selling a company when they disapprove of management or strategy, index fundsters still have to hold that company if it's part of the index.
"Any proposal to concentrate voting power in the hands of active managers (who represent a steadily declining ownership stake) is akin to taking political voting rights away from permanent residents and giving them only to visitors," McNabb adds. 
Edited by:
Neil Anderson, Managing Editor
Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE