Vanguard Gets the VOO Proxy Vote Out

Investors in the world’s biggest ETF will soon be able to say how they want their shares voted in proxies, such as one for the world’s largest pay package for the world’s richest person.

Starting next year, Vanguard is extending its 500 Index Fund, including the VOO ETF, to its Investor Choice program, which gives fund investors a handful of proxy voting options. Those include a policy to follow corporate board recommendations, a third-party advisor’s policy aimed at maximizing wealth, one to mirror other shareholders’ votes, one directed by Vanguard and another following ESG recommendations. That latter is offered by Glass Lewis, which along with fellow proxy advisor ISS, recommended opposing a proposed 10-year total compensation package for Tesla CEO Elon Musk that could be worth nearly $1 trillion and increase his proportional ownership in the company. 

That’s almost as much as Vanguard’s 500 Index Fund, which sits at about $1.4 trillion.

Not Entirely by Choice

Vanguard, along with other massive firms like BlackRock and State Street, rolled out policy voting guidelines a few years ago. “This is also a way for Vanguard to address the issue of its size. Regulators (and critics) have raised concerns about Vanguard’s significant stake in corporate America and questioned how it uses that influence and voting power,” said Jeff DeMaso, editor of The Independent Vanguard Adviser. “This program lets Vanguard deflect those criticisms: Vanguard can say it’s not ‘controlling’ how all of its shares are voted, it’s letting individual investors direct its votes.” Regardless, it can be seen as a win for the company and for fund shareholders, DeMaso said.

A look at Vanguard’s Investor Choice program, which is in its fourth year:

• It currently applies to about $1 trillion in assets across numerous funds and will apply to $3 trillion, and 20 million investors, with the expansion announced on Tuesday.
• However, only about 80,000 investors opted for a voting policy for the 2025 proxy season, but choices were somewhat evenly split, as no single policy got more than 35% adoption, according to Vanguard.

One Voice, Many Votes: It would be overwhelming, if not nearly impossible, for individual fund investors to direct how their shares are voted for every issue at every company, hence the need for broad policies. “Central to Vanguard Investor Choice is the core belief that investors should have the option to express a preference for how their index fund holdings vote,” Global Head of Investment Stewardship John Galloway said in a statement, adding that the goal is adding it to all the company’s US equity index funds.