In other words, we’re big, we don’t make a lot of noise, and we’re focused on the long term.
That is precisely why we care so much about good governance. Vanguard funds hold companies in perpetuity. We want to see our investments grow over the long-term. We’re not interested in managing the companies that we invest in. But we do want to provide oversight and input to the board of directors. And we count on boards to oversee management.
That perspective informs our approach to corporate governance. So let me share, at the very highest level, our six principles on governance. These are some of the same ideas that the panelists discussed earlier this evening:
Independent oversight and, more broadly, appropriate board composition. It is the single most important factor in good governance. If you think about it, we’re in a representative democracy. We empower a group of people to oversee our interests as shareholders, to hire and fire the CEO, and to have a say in strategy, risk oversight, compensation, and so forth. We as shareholders are not there, and that group of representatives needs to be our eyes and ears. Who they are, how they interact, and the skills they bring to the table are critical from a long-term value standpoint.
Accountability. Management should be accountable to the board. The board should be accountable to shareholders.
Shareholder voting rights that are consistent with economic interests. This means one share, one vote. No special share classes for added voting power.
Annual director elections and minimal anti-takeover devices. We believe that shareholders benefit when the market for corporate control functions freely.
Sensible compensation tied to performance. The majority of executive pay should be tied to long-term shareholder value.
Engagement. I’d like to place my greatest emphasis on engagement tonight, because it serves as a touchstone for all of our other core principles.