Credit to Vanguard for upping its corporate engagement, but why hasn’t it done more sooner? An obvious answer would be its passivity. Most of Vanguard’s AUM are in index funds which hold securities indefinitely so active corporate engagement is arguably less necessary. Responsibility for governance oversight rests with exchanges and index providers. But as AUM grows it brings responsibility. Vanguard holds approx. 6% of every company in the S&P 500 yet it’s been slow to push corporate engagement. It’s not alone in its relative inaction. Approx. 25% of all AUM is in passive management. This equates to $19tn, of which BlackRock, Vanguard and State Street manage 65%. The market cap of S&P500 is $20tn so it’s safe to assume constituents list these managers high on their shareholder registers. There are examples of engagement but relatively infrequent. To a degree passive behemoths are victims of happenstance. In just over 10 years BlackRock has gone from $250bn AUM to just under $6tn. Such growth is doubtless difficult to manage, but it’s no longer justifiable to follow a mantra of ‘we follow an index, the index manager sets the rules’. Hiding behind a veil of passivity is an abdication of responsibility. Roll on greater corporate engagement for passives.