Sconie wrote: ↑
Mon Jun 24, 2019 1:43 pm
whodidntante wrote: ↑
Sun Jun 23, 2019 3:27 pm
Tycoon wrote: ↑
Sun Jun 23, 2019 7:25 am
I'm am starting to question Vanguard's business plan.
I learned on this forum that the ownership structure of Vanguard is better and the Johnson family et al might trick us out of our money. Try calling in like you own the place.
But wouldn't it be wonderful if Vanguard actually communicated with us as though we were real---instead of, at best, indirect----owners? Like telling us what the business strategy and goals are----or even (God forbid) being transparent and letting us have our say on Vanguard's executive compensation....
I finally managed to become a customer of Vanguard UK, about 35 years after I first read of Vanguard in Burton Malkiel, and 18 years after I first read John Bogle's books. And there is no pretense (as far as I know) that as such I am an "owner" - and I don't know what the legal structure actually is.
However mass rule of corporations does not have a good track record. At least it was tried in Yugoslavia in the Tito years as an alternative to Marxist-Leninist "democratic centralism" (all dictatorships thrive on paradoxical statements as George Orwell pointed out Ministry of Truth, Ministry of Peace etc.).
It didn't work too well. The workers voted themselves pay rises even when that put the company into a position where it needed a state bailout. There was no concept of unemployment and business failure, thus no break on the actions of employees.
(there have been happier examples. John Lewis Partners, the UK department store chain, is configured like an ordinary company, but employees are "partners" and owners and receive an annual dividend as a bonus. There are employee councils to filter up feedback to higher levels of management")
On exec pay I can see why it rankles, and there is surely a problem with executive compensation, (not only) in America. In effect, executives are being paid for beta, but not for genuine alpha.
But I am not sure that VG investors in aggregate would make good strategic decisions, and would probably be unwieldy at best. Exec comp is probably best set by reference to asset management industry norms - as far as I know, VG does not pay well compared to competitors-- Larry Fink (Blackrock) say vs. the current CEO of Vanguard? You or I are not well placed to determine what the CEO of Vanguard is "worth". Saying that Boards of Directors don't get it right is not the same thing as saying that we *will* get it right.
I keep thinking of Gus Van Sauter, say, who ran a team that eventually managed hundreds of billions of (mostly fixed income?) assets. What is his contribution actually worth? Could it not in fact have been many times his actual compensation?
A greater risk, and this happened in the UK to the mutually owned building societies (mortgage lenders), would be an activist group of owners get a motion going to demutualize. In effect that hands current customers a windfall, but it strips that away from all future customers - the invisible bonds that tie us to our future, that make up a civilization, the idea that we build not only for ourselves and our children, but for other peoples' children and grandchildren and so on into forever, that's a central concept of civilization.
What's to stop such an activist shareholder group stripping out Vanguard's resources to pay a dividend? Or even increasing fund fees to increase profitability so the business could be demutualized?