Decentralizing Voting Power

Decentralizing Voting Power

Summary

This post summarises research by Brian Monsen and co-authors on the effects of decentralising proxy-voting authority within Vanguard. In 2019 Vanguard moved voting authority for 31% of its equity funds from its central stewardship group to the funds’ external investment advisers. Using this partial shift as a natural experiment, the authors compare how decentralised voters behave relative to Vanguard’s stewardship team when voting on the same firms, meetings and proposals.

Key results: decentralised voters are materially more likely to oppose management recommendations — especially on shareholder-sponsored proposals and ESG proposals — and are not simply rubber-stamping proxy-adviser recommendations. The findings have clear implications for proposed pass-through voting rules and for how large asset managers structure voting choices.

Key Points

1. In 2019 Vanguard moved proxy-voting authority for 31% of its equity funds to external investment advisers while keeping fund management unchanged, creating a clean comparison group within the same organisation.
2. Decentralised voters are substantially more likely to oppose management recommendations than Vanguard’s stewardship group — the effect is strongest for shareholder-sponsored proposals (decentralised voters are about 21.5% more likely to oppose management on these).
3. The biggest change is increased support for shareholder ESG proposals under decentralisation, implying decentralisation could boost ESG success rather than suppress it.
4. Only a minority (≈15%) of decentralised voters simply follow proxy-adviser recommendations; on average they are not more likely than Vanguard’s stewardship group to adopt ISS or Glass Lewis guidance.
5. Decentralised voters with more concentrated holdings are less likely to align with proxy-adviser recommendations, suggesting active monitoring where stakes are higher.
6. On “contentious” votes (where management and proxy advisers disagree), decentralised voters are about 21% less likely to support management, signalling greater independence and monitoring.
7. Prior to Vanguard’s policy change, voting records of BlackRock, Vanguard and State Street were broadly similar, indicating the results are not just a Vanguard anomaly.

Why should I read this?

Short version: this paper tells you whether shifting voting power away from a central stewardship team actually changes outcomes — and it does. If you care about how the Big Three, pass-through programs or proxy advisers shape corporate decisions, these findings matter. We’ve done the heavy lifting: the experiment is tidy, the results clear, and the implications for policy and fund design are immediate.

Context and Relevance

Most U.S. public shares are institutionally held, with large asset managers exerting big influence through proxy votes. Debates about decentralising that authority (including legislative moves like the INDEX Act and new pass-through schemes) are escalating. This research provides empirical evidence that decentralisation to external advisers tends to increase opposition to management and support for shareholder proposals — notably ESG — and that decentralised voters do not merely outsource decisions to proxy advisers in most cases.

For policymakers, fund boards, institutional shareholders and corporate managers, the study foreshadows how pass-through or choice-based voting programmes might reshape board accountability, engagement incentives and the role of proxy advisers. It also suggests heterogeneity: voters with broad, diversified holdings may lean more on proxy advisers, while concentrated holders act more independently.

Source

Source: https://corpgov.law.harvard.edu/2025/10/01/decentralizing-voting-power/