Vanguard’s new stewardship insight publication on how it evaluates corporate political activity shareholder proposals explains the circumstances under which it believes political contributions and/or lobbying may give rise to material financial, legal, and reputational risks that might prompt its support for shareholder proposals seeking political activity disclosure and/or other information. Generally, Vanguard analyzes such proposals on a case-by-case basis based on its assessment of the risks.
Vanguard expects boards to oversee and communicate to investors the company’s philosophy about and policies pertaining to corporate political activity. Along those lines, boards should be prepared to respond to these questions in conjunction with Vanguard’s analysis of a proposal to the extent the information has not already been communicated or there is an information gap or disconnect:
- Which committee of the board is responsible for oversight of corporate political activity?
- Can you explain the board’s process for overseeing corporate political activity? How often does the board review this topic? Who within the management team is responsible for corporate political activity?
- What is the company’s philosophy about corporate political activity? How does the company’s political spending strategy align with the company’s stated long-term business strategy?
- If corporate political activity and company strategy do not appear to be aligned, why not? And how does the board manage related risks, such as reputational risk?
While seemingly not “required” in order to avoid its support of a shareholder proposal, Vanguard encourages public disclosure of companies’ political spending policies and contribution recipients. Notably, when faced with a shareholder proposal, Vanguard will evaluate whether a company’s disclosure lags its peers and industry practice and any disconnects between a company’s political activity and strategy, either one of which may prompt its support of such proposal.
See our report: “BlackRock Seeks Disclosure of Corporate Political Spending & Activities” and additional resources on our Political Contributions and Disclosure and Institutional Investors pages.
This post first appeared in the weekly Society Alert!