By Rebecca Ungarino

Vanguard is adding more large index funds to a nascent program that gives individual fund investors the option to select the way they'd like to vote on companies' proxy ballots, underscoring how testy the proxy-voting ecosystem has become for a group of asset managers with outsize influence as shareholders.

The Valley Forge, Pa.-based money manager is set to announce on Thursday that it's added four equity index funds representing some $683 billion to its program. Vanguard says the initiative, called Investor Choice, now extends to 10 million eligible individual investors across 12 funds of $1 trillion in assets. The firm started it in early 2023.

Rivals BlackRock and State Street have launched similar efforts that open up the option for fund investors to vote for themselves on key ballot issues such as executive pay, board composition, and environmental policy. Vanguard, which oversaw some $10.4 trillion of assets at the end of January, says its own program now provides proxy-voting choices to more individual fund investors than others' do.

"Vanguard has been a pioneer with Investor Choice and this expansion will give millions more individual investors the chance to ensure their voice is heard at the companies their funds own," Vanguard Chief Executive Salim Ramji said in a statement to Barron's. "For 50 years, we have democratized investing for our 50 million clients, and we are proud to build on our legacy of giving investors a fair shake."

Because passive fund investors don't own the underlying stocks outright, they've traditionally had to leave their proxy-voting choices up to fund companies. The four funds Vanguard is adding are the Vanguard Growth Index Fund, the Vanguard Value Index Fund, the Vanguard Mid-Cap Index Fund, and the Vanguard Large-Cap Index Fund.

In recent years the largest fund-management firms' statuses as enormous shareholders -- indirectly, through the vehicles they manage on clients' behalf -- have drawn intense scrutiny from lawmakers and activists. The criticism stems most broadly from their sway in casting influential votes on hundreds of companies' ballots, and how they've voted while promoting sustainable investing policies.

Republicans have led that charge. This month, the U.S. Department of Justice and the Federal Trade Commission supported a lawsuit filed against BlackRock, Vanguard, and State Street by Republican attorneys general over how they've voted on energy sector issues. The firms have filed a motion to dismiss the suit; BlackRock called the case "baseless."

These burgeoning proxy-voting options for investors allow the asset managers to hand off some of their own voting power to individuals. They can show they don't hold all the cards when it comes to voting on ballots, especially when a measure is seen as contentious.

These kinds of programs are in their early days, and it remains to be seen how many investors will ultimately take advantage of them.

Vanguard said last fall that some 40,000 individuals -- 2% of the two million investors eligible at the time -- participated in the program during the 2024 proxy season. That's increased to 60,000 so far this proxy season, a person familiar with the matter said.

Vanguard says investors are interested in making their voices heard through the proxy process but that many aren't yet aware that such options exist. The firm recently released a survey showing 83% of the 1,347 adults who were polled in the U.S. -- some 1,000 of whom identified as investors -- believe "it's important that asset managers consider their preferences when casting proxy votes."

The company now has a team within its investment stewardship group, led globally by John Galloway, dedicated to the two-year-old Investor Choice effort. David Reiner was named head of the program last fall, and John Croke, another longtime leader at the company, has been head of business activation for the program since 2024.

Vanguard competitors, employees, and the passionate legions of retail investors who follow the firm -- known as Bogleheads for the late founder John Bogle -- have been watching to see how Ramji, a former top BlackRock executive, makes his mark.

Though Vanguard's program was set in motion before he arrived, Ramji has worked on adding fund investors' options -- and addressing criticism of the industry's proxy-voting records -- for years.

He was an architect of BlackRock's investor choice program while global head of iShares and index investing there, responsible for the world's largest exchange-traded fund business.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com

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May 29, 2025 08:30 ET (12:30 GMT)

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