BOSTON–(BUSINESS WIRE)–At today’s Vanguard shareholders meeting, results were announced for ballot Question 3 which asked the fund’s Board to “institute procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity.” For the 21 Vanguard funds reporting results, affirmative votes ranged between 7 and 17%.
Question 3, the first ever shareholder proposal included on a Vanguard proxy, is part of broad campaign of shareholder action coordinated by Investors Against Genocide. The proposal will also be voted on at Fidelity’s July 15 shareholders meeting and is expected to be on the ballot in August for The Investment Company of America, a $53 billion fund, from American Funds, with more than 4 million shareholders.
“Favorable votes at Vanguard’s meeting today were unnaturally low because Vanguard’s active opposition and misleading statement of opposition tilted the vote against the proposal,” said Eric Cohen, Chairperson of Investors Against Genocide. “If Vanguard wanted a good test of shareholder support, it would have taken a neutral stance, rather than seeking to obscure the interests of shareholders, especially since it is common practice for ordinary investors to ignore and discard their proxy materials.”
In Vanguard’s proxy materials, the company asked its shareholders to vote against the proposal because it calls for procedures that “duplicate” existing practices and is “substantially identical” to existing procedures of the Vanguard funds. However, Vanguard has not released the text of a Board policy, beyond the statement of opposition, that details how Vanguard will avoid holdings that are tied to genocide or crimes against humanity. Also, Vanguard’s quarterly holdings reports showed that it continues to hold and purchase additional shares of PetroChina (NYSE: PTR) and other oil companies tied to the genocide in Darfur, Sudan.
At the meeting, concerned individuals, including two men from Darfur, repeatedly asked John Brennan, Vanguard’s Chairman of the Board, for an explanation regarding Vanguard’s decision to hold PetroChina. Mr. Brennan declined to answer the question directly stating only that “it was the judgment of the board.”
“This lack of candor and transparency as well as Vanguard’s continued investments in companies which help to fund the genocide in Darfur contrast directly with Vanguard’s published ‘pledge to clients’ to ‘communicate candidly’ and to ‘adhere to the highest standards of ethical behavior and fiduciary responsibility,’” said Cohen.
In his prepared remarks at the Vanguard shareholder meeting, Cohen stated, “Many shareholders, whose votes will be recorded today, read Vanguard’s statement and believed that the issue raised in the proposal no longer applied. Those shareholders have been misled by Vanguard.
“The shareholder proposal requires proactive attention to prevent acquiring problem companies and requires corrective action if they are already in the portfolio,” explained Cohen. “Vanguard has made no commitment to taking any such action. Rather, Vanguard’s Plain Talk About Proxy Proposal 3 web page says that ‘the trustees have determined that no companies have warranted divestment.’ Even worse, Vanguard’s quarterly report of its holdings, after filing its proxy materials, showed that Vanguard had increased its holdings in PetroChina and the other worst offenders complicit in Sudan: Petronas, ONGC and Sinopec.”
Since early April, Investors Against Genocide attempted to engage in dialog with Vanguard in the hopes that the company would offer its customers the necessary information to properly evaluate whether the shareholder proposal and Vanguard’s policy are indeed duplicative. However, the company declined to engage in dialog.
According to Cohen, Vanguard’s lack of transparency stands in stark contrast to the recent, clear, public statements by TIAA-CREF to take strong action against problem companies, and the public action by 27 states and 61 colleges and universities that have divested from targeted companies with ties to the Sudanese government.
The shareholder proposal for genocide-free investing raises the issue of the fundamental management responsibilities of financial institutions and whether shareholders should be able to expect mainstream funds to avoid investing in companies contributing to genocide. The public’s interest in this expectation was highlighted by a 2007 study by KRC Research, in which 71% of respondents said companies should take into account extreme cases of human rights abuses, such as genocide, when investing overseas, rather than base their investment decisions on economic criteria only.
Investors Against Genocide is a non-profit organization dedicated to convincing mutual fund and other investment firms to change their investing strategy so as to avoid complicity in genocide. The organization works with individuals, companies, organizations, financial institutions, the press, and government agencies to build awareness and to create financial, public relations, and regulatory pressure for investment firms to change. The ultimate goals are that the Government of Sudan ends its deadly genocide in Darfur and that investment firms avoid investing in genocide. For more information, visit www.investorsagainstgenocide.org.
Contacts
Investors Against Genocide
Susan Morgan, 617-797-0451
