Two of America's biggest passive funds are about to get aggressive with companies

Gus Sauter Bill McNabb VanguardREUTERS/Tim ShafferVanguard Group’s Chief Investment Officer Gus Sauter (R) stands with Vanguard CEO Bill McNabb in the board room at the Vanguard Headquarters.

Prominent fund managers Vanguard and BlackRock are the latest firms to embrace shareholder activism.

On Wednesday, the Wall Street Journal reported that both companies are becoming more involved with the companies they invest in and their corporate boards.

The article quotes a letter from Vanguard CEO Bill McNabb, who said, “In the past, some have mistakenly assumed that our predominantly passive management style suggests a passive attitude with respect to corporate governance. Nothing could be further from the truth.”

The letter, which encouraged companies to engage more with investors, was sent to several hundred public companies.

BlackRock also recently revised voting guidelines to provide more oversight in board re-elections. The new guidelines address issues such as long tenures, board diversity, lack of attendance, and protecting shareholder rights. BlackRock could vote against re-election if these issues come up.

McNabb told the WSJ that given the size of their holdings in major U.S. companies, the move into corporate governance is appropriate. “We should be doing this. We felt like we should take it to another level,” he told the publication.

Vanguard holds about $US3 trillion in assets and BlackRock holds $US4.65 trillion globally.

Read the full story at Wall Street Journal >>

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