Sunday, May 3, 2009

Vanguard spoils my post-vacation bliss

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.

10 comments:

Annette said...

Trying to slip something in on you weren't they.. sneaky bastards... All these companies are trying things anymore I believe. Good catch.

Glad you are home, sorry your vacation bliss was ruined by this.

an average patriot said...

Hi Red
Hope you had a nice vacation, What yiu use to go is wht got us in trouble from the Government on down.
We made the mistake of trusting others to do the right thing for us and they do not. They do the right things for themselves. Everyone must do what you asre doing. Good one!

Fran said...

Hmmm considering the recent confirmations of the torture (human rights violations), I wonder if the US & many companies (war profiteers- including Boeing, GM, Halliburton) fall under this category & that is why the board is voting no???

Tangled web we weave, or more accurately, Bush & Co wove.

D.K. Raed said...

Annette:
They did kind of hide Prop #3 among other proxy-vote BS. The fact that they haven't asked their customers to proxy-vote on anything for 7-yrs is surely not a coincidence.

Avg Patriot:
I did have a nice vaca. I'll post pics later. But yeah, going through the after-vaca mail, I almost tossed the Vanguard thing. Looked like mutual fund junk mail, but I had a weird feeling that I should read it carefully.

D.K. Raed said...

Fran:
Giving Vanguard the benefit of the doubt for a moment, what if they want to pull out of the human rights abuser securities, but if they do that & it costs the shareholders earnings, they might get sued by the shareholders for not keeping profit at the top of the list? So this way, they make the shareholders vote (1st time in 7-yrs) and then they can blame any ensuing losses on the shareholders themselves?!?

I'm just glad that "Investors Against Genocide" is pushing the major mutual fund companies (like Vanguard, Fidelity, Franklin Templeton and American Funds) to address this issue, not keep sweeping it under the rug.

Mauigirl said...

Thanks for the heads-up. Vanguard runs our 401k but I don't know if we get to vote or not. If I get one of these things in the mail I'll certainly vote against genocide!

Looking forward to your vacation pix.

Spadoman said...

Good to see you back, hope the vaca was a good one. I don't invest directly, but I wonder how much of the money we spend funds corporations that do invest in unethical and against human rights funds? It would take years of work to follow every dime we spend on anything. I start with looking at the shoes we wear. Who made them? Where? What materials? Following these clues and wearing anything commercially made with leather one can see that we support the cattle industry and cheap unfair labor practices in a foreign country.
If we scrutinize everything we spend, with every day commerce being the investment, we support genocide and other human tragedy every day. That, to me, is where the agenda is really hidden.

Peace.

Fran said...

Come to think of it, US gvmnt Bonds may fall under that category, which is usually offered as a safe investment option.

It would be interesting to see if they consider the US government to be one of the Human Rights abuse culprits?

Historically, I remember there being a major boycott of S. Africa financial trading which did help put pressure on ending Apartheid.

Money talks!

D.K. Raed said...

MauiGirl:
Every vanguard customer should be receiving a fat white envelope with all the voting instructions. If you don't get it soon, you can call or email them and they will tell you how to access it online. Or look at the proxy-vote link in my post. I think you need to give them a vanguard acct #.

Spado:
That is kind of the argument Vanguard was making ... that everything is tainted is some way and their mission is to provide shareholder profit. I don't try to analyze every little thing I use or buy, but when I see one of the largest mutual fund companies, so large their every investment decision has global effects, trying to skate out on any meaningful humanitarian criteria, I think they better clean up their act or risk shareholder flight.

Fran:
I did not think of Govt Bonds! But I note that Vanguard offers some funds that invest in govt securities and none of them are being targeted by this particular proposal. So I'm guessing there is little or no exposure there. But what do I really know?

And yes, the sanctions we put on S. Africa, after Desmond Tutu told us we could go to hell if we didn't, definitely did have an effect ... maybe not immediately, but long term. We may not be the same old superpower we once were, but we still have tremendous clout which could be used for good purposes in this way.

Fran said...

The US will pass the muster of non human rights abusers because we CURRENTLY do not torture, but could not say that 4 months ago.

We used to torture but no more, cause' we got us a socialist president now!

(Do you detect snarky sarcasm there???)