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Vanguard funds meet quorum in proxy vote as genocide measure fails

Vanguard’s proxy ballot may throw some investors. Its board asks investors to vote “against” restricting investing in companies that “substantially contribute” to genocide. (Yahoo Finance)

Vanguard had its proxy vote on Wednesday after a long campaign to get shareholders out to vote. There was a quorum for every fund, and new board members were approved.

The controversial “genocide vote,” Proposal 7, was not approved — as expected. The vote would have compelled divestment from companies with ties to Darfur or other companies that “significantly contribute” to genocide and crimes against humanity.

As the company is a cooperative owned by anyone with a Vanguard fund, the investment giant was concerned with not getting enough voters to ratify its agenda, a potentially expensive situation as each proxy vote campaign is costly. For this campaign, the first in eight years, Vanguard spent $18 million.

Proxy votes are not common for Vanguard, and the vote was the first for many of its shareholders, given the massive influx of cash into passive investing, and Vanguard specifically. When the company last had a vote in 2009, Vanguard had only $1.6 trillion in assets were under management. Now, that number sits at $4.6 trillion

With all these new investors involved, who may not be wise to Vanguard’s philosophy that “divestment is an ineffective means to implement social change,” Proposal 7 became a focal point of the vote as new voters, when asked, are probably less likely to vote for anything that remotely endorses genocide investment.

Environmental, social, and governmental concerns have been steadily increasing in the world of investing, and ballot measures like Proposal 7 have emerged, often led by Investors Against Genocide, a group of activist investors based in the Greater Boston Area.

This has put companies in tough positions, because as fiduciaries, they are obligated to put financial considerations first. In some cases, however, there can be harmony: Climate change poses a tremendous business risk.

For now, at least, Vanguard has avoided the pit of having to schedule another vote and renew an expensive campaign.

Ethan Wolff-Mann is a writer at Yahoo Finance. Follow him on Twitter @ewolffmann. Confidential tip line: emann[at]oath[.com].

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