Proxy Voting of ETF Holdings
In a post I wrote in April 2020 entitled, “The Seemingly Forgotten Tool of Corporate Governance” [link], I advocated that owners of ETFs and mutual funds should have a say in the proxies voted by the ETF manager, a service otherwise done by the investment manager, or more typically, outsourced without any say in the matter to proxy advisory firms like ISS or Glass Lewis.
Specifically, I stated “My proposal is to let investors of index funds vote the shares owned by the fund. In my opinion, adding this choice would be beneficial to investors, not burdensome. Investing in index funds is not a completely passive activity: investors must choose the index they seek to track, the institution that operates the fund, and the timing at which they invest. They should have some say in how the shares are voted. Giving retail investors the opportunity to vote the shares they literally paid for would make for a more democratic system.”
Further, I suggested “investment companies could poll owners of their funds and vote shares in proportion to these poll results.”
Earlier this month, four years hence, I got an email with the subject line: Your voice, your vote: A new proxy voting opportunity in iShares Core S&P 500 ETF (ticker: IVV).
While the large orange button didn’t offer me the chance to vote individual proxies of the 503 holdings of the S&P 500 in iShares’ IVV ETF, the selections allowed for more influence over the voting direction of the underlying holdings. The choices were:
- BlackRock Voting Policy
- ISS Global Board Aligned Policy
- ISS Socially Responsible Investment Policy (SRI)
- ISS Catholic Faith-Based Policy
- Glass Lewis Corporate-Governance Focused Policy
- Glass Lewis Benchmark Policy
- Glass Lewis Climate Policy
Is this a perfect solution? No. But I’d much rather have the choice between seven voting strategies than have no choice at all.
Perhaps in the future, other menu options will be to sell shareholder votes on a marketplace like the Shareholder Vote Exchange or vote the proxies of individual component holdings. But for now, I’m pleased to see more options and transparency in the proxy voting process of this ETF.
