Glenn Booraem, BBA ’89, leads the Investment Stewardship team at Vanguard, voting for more than $5.5 trillion worth of investments and engaging with more than 700 different companies last year.
Booraem returned to the Fox School Feb. 5 as a one-day Executive in Residence. Shortly after arriving on campus, Booraem was a guest lecturer in a classroom with Professor Lalitha Naveen and several PhD students from the Accounting, Finance and Strategy departments. He also met with administrators, faculty and staff and attended a Translational Research Seminar in the new executive conference room at 1810 Liacouras Walk.
Since 2001, Booraem has led Vanguard’s investment stewardship efforts. He is involved in several industry initiatives, including the Investor Stewardship Group, the Investor Advisory Group for the Sustainability Accounting Standards Board and is a frequent speaker on corporate governance matters.
He has been named to the National Association of Corporate Directors’ Directorship 100 list every year since 2010 and is considered one of the most influential people in corporate governance.
As the investment stewardship officer at Vanguard, Booraem is an expert in board governance and how it aligns with long-term value for organizations. Booraem explained that the majority of Vanguard investments are index funds, and so Vanguard buys shares in all the companies listed in a fund, such as the S&P 500, the Russell 500 or the FTSE 200. As a result, Vanguard holds shares in more than 13,000 companies around the world on behalf of 20 million clients who have invested $5.5 trillion through the firm.
“Because we are going to own all of those companies we want to make sure they are run well in the long-term interests of their owners,” Booraem says. “That really starts with the board of directors. The board of directors is the group that works for us as shareholders to select management. They hire and fire the CEO, they oversee management and they incentivize management through compensation.”
Vanguard has three ways it influences board governance and corporate management to ensure they are aligned with creating long-term value for investors. Booraem explained:
First, they are the proxy vote on all the shares their investors hold. At annual board meetings, the stewardship team votes on all the items on the ballot for a given company.
“We’ve got a really simple mission, to take a stand for all investors, treat them fairly and give them the best chance for investment success,” Booraem says. “From a governance standpoint, taking a stand for all investors by using our voice and our vote to support better governance of companies we believe adds value and that gives our clients the best chance for investment success.”
When Vanguard has questions or concerns with a particular company, Booraem or another member of the team will approach the board or management for a one-to-one conversation. Vanguard engages with a company when there is an item on the ballot that they are concerned with, or if there is a crisis such as a data breach or a scandal involving management or executives.
“Having the opportunity to talk to management or the board gives us the ability to wander into the shades of gray,” Booraem says. “We have black and white opportunity on the ballot but engagement gives us the opportunity to steer our discussion in the right direction.”
The third form of influence the stewardship team has is through regular interaction with the board and management teams of companies.
“We expect to largely, by virtue of the index funds, practically be a permanent owner of the stock over the long term,” Booraem says. “If we see gaps in their board composition, or if they have difficulty articulating how their capabilities are aligned with long-term strategy, that gives us an opportunity to say, ‘your shareholders should better understand the linkage between what you are doing on the governance side and long-term value.’”
What are index funds?
Index funds are a form of mutual funds. Mutual funds are money pooled together by a group to invest in stocks, bonds or other securities, and controlled by a manager. An index fund is a mutual fund with a portfolio of securities designed to match the components of a market index, such as Standard & Poor’s 500 Index. The purpose is to provide broad market exposure with low operating costs and relatively few changes in the portfolio.