Yes, I'm back from the vaca (more on that later)! My post-vacation bliss was spoiled while sorting through my backlog of accumulated mail and finding an interesting proposal included in a Vanguard Notice of a Special Shareholder Meeting. Usually I just throw away these Proxy-Vote things because my vote doesn't matter and I don't care about the arcane things mutual fund shareholders are normally asked to vote on.
Vanguard is probably the largest of the no-load mutual fund companies and is a common choice of many individual, corporate and institutional pension plans. If you are a Vanguard customer you will be getting the same notice asking you to vote. I urge you not to just throw it away this time, or worse check the box that casts your vote "in accordance with the Board recommendations". Please carefully read Proposal #3:
3. "Shareholder Proposal that the board institute procedures to prevent holding investments in companies that, in the judgment of the board, sustantially contribute to genocide or crimes against humanity, the most egregious violations of human rights."
No brainer, right? Vote Yes, which is to say, FOR this proposal!
But the Vanguard Board does not agree. If you cast your proxy-vote to follow their recommendations, you will be voting AGAINST this proposal. If you don't vote at all (my usual procedure, but not this time), you will be enabling the Vanguard Board to implement its desire to defeat this proposal.
note: this is the first time in 7-yrs Vanguard shareholders are being allowed to vote ... hmmm ... 7-yrs ... has to be related to all the deregulation that was going on because we used to get these vote-by-proxy things every year.
That this proposal is even on the ballot is thanks to certain shareholders who are concerned that Vanguard is making investment decisions based soley on financial and legal considerations, even in the face of the most egregious violations of human rights, such as genocide. Thus, ordinary individuals like you and me may be inadvertently investing in companies funding genocide. The problem is not theoretical since many mutual funds hold shares of PetroChina and/or China National Petroleum Company, which is providing funding that the Govt of Sudan uses to conduct genocide in Darfur.
Given a choice, investors would probably not want their pensions and family savings connected to genocide. Reasonable people may disagree about what constitutes socially responsible investing, but few people want their savings to be complicit in genocide.
The Vanguard Board does not agree, stating that Vanguard's goals are "to maximize returns in order to help shareholders meet their financial goals". They believe "mutual funds are not the optimal agents to address social change". However, they do "acknowledge that there may be instances when it is appropriate to assess such issues", and are therefore directing Vanguard to implement a procedure for reporting to the Board about such investments that might warrant disinvestment.
Prior to this proposal, Vanguard's oversight was limited to "considering important social issues". Those considerations have never been publically revealed. Do you trust the Board to suddenly adequately review and "disinvest" in companies that are earning profit for the shareholders if they happen to be involved in crimes against humanity? In this current investment climate of lost shareholder equity, I think that is highly unlikely.
Per the Proxy Notice, Vanguard® funds will hold a Special Meeting of Shareholders on July 2, 2009, at Vanguard’s offices in Scottsdale, Arizona, to vote on shareholder issues.
Vanguard's Scottsdale office address is 14321 N. Northsight Blvd, Scottsdale AZ 85260. The meeting commences at 8:30 AM local AZ time. It is open to all Vanguard customers.
Proposal #3 will be presented and voted upon at this meeting. Part of the discussion is expected to involve future vs existing investments because Proposal #3 calls for corrective action. If the threat of Vanguard's "disinvestment" does not effectively influence the violating company's practices, then the security should be dumped.
If you don't attend in person (Scottsdale in July? could they have picked a more hellish venue?), cast your proxy-vote by mail, by phone, or online. Instructions are in the Information Packet sent with your ballot. I just cast my vote FOR Proposal #3, and if you are a Vanguard customer, I hope you will, too.
To read what Investors Against Genocide has to say about Vanguard's lack of transparency on such an important issue, click here.
For a personal piece by IAG's Susan Morgan about Darfur and why Vanguard customers need to exercise their voting rights, click here.
If you want some info about the connection between the Darfur Genocide, Oil and China, click here.