Louder Calls for Directors to Focus on Climate, Gender Equity & Long-Term Results

By Eve Tahmincioglu

Calls for board members to focus on climate risk, gender equity and long-term results, are getting louder, as another large investment company joined the chorus.

This week, Vanguard added its voice, and potentially its proxy voting power, to these issues in an open letter to public company directors from the fund’s Chairman and CEO William McNabb.

On climate risk, the letter states:

Climate risk is an example of a slowly developing and highly uncertain risk—the kind that tests the strength of a board’s oversight and risk governance. Our evolving position on climate risk (much like our stance on gender diversity) is based on the economic bottom line for Vanguard investors.

On gender equity:

Gender diversity is one element of board composition that we will continue to focus on over the coming years. We expect boards to focus on it as well, and their demonstration of meaningful progress over time will inform our engagement and voting going forward.

(Related article: Fearless Girl Message Going Global)

And McNabb reiterated the company’s desire to get more public companies thinking more long term, writing that: “a long-term perspective also underpins our Investment Stewardship program. We believe that well-governed companies are more likely to perform well over the long run.”

Vanguard joins recent moves by BlackRock and State Street to push for, in varying degrees, all three governance stances, steps that some governance experts say are sorely needed.

(Related article: Swinging the Pendulum Back to Long-Term Thinking)

As far as a long term approach, Martin Lipton, founding partner and Sabastian V. Niles, a partner, of Wachtell, Lipton, Rosen & Katz, stated in a memo published this week that:

In a welcome development, Vanguard re-emphasized their commitment to bringing a long-term perspective to public companies, rejecting a myopic focus solely on short-term results, and recognized that their status as one of the largest investors in any given public company, whether through their index funds or through their active equity managers (most of whom Vanguard notes hold their positions longer than peer averages), gives them heightened influence and even responsibility for promoting responsible stewardship actively focused on the long-term.