On January 31st, Vanguard, a leading mutual fund manager, revised its guidance for U.S. companies regarding the inclusion of women and minority directors, reflecting the evolving landscape of corporate diversity initiatives under the new Trump administration.
With assets totaling $10.1 trillion under its management, changes in Vanguard's directives are being closely monitored as the 2025 annual shareholder meeting season approaches in March.
Vanguard's proxy voting policy for U.S. companies, previewed by Reuters ahead of its release on Friday, removed a provision from its 2024 policy that called for boards to exhibit diversity in gender, race, and ethnicity, in addition to tenure and skills diversity.
The adjustment by Vanguard is intended to align with regional norms, such as the UK's expectations. The U.S. lacks a similar requirement, and Nasdaq has ceased its related initiative.
According to John Galloway, Vanguard's global head of investment stewardship, Vanguard does not stipulate specific quotas for director composition but seeks to offer clarity. He noted, We have never had quotas, and in the first instance look for boards to follow the listing standard and market expectations of the markets they are in.
While continuing to advocate for diversity in boardrooms by emphasizing a variety of personal characteristics, Vanguard's guidance for U.S. companies underscores the importance of diverse boards for effective shareholder oversight.
Despite pressure on executives in all sectors to reconsider diversity, equity, and inclusion policies, as seen by recent executive orders issued by President Donald Trump, support for such initiatives remains strong in some companies like Costco, where only 2% of voters opposed a resolution against diversity initiatives on January 23rd.
Following increased calls for diversity prompted by the Black Lives Matter movement in 2020, representation in boardrooms has advanced progressively. However, the advancement of women and minority individuals is decelerating, prompting a reassessment of recruitment priorities.
Vanguard's competitor, BlackRock, incorporated changes in its 2025 directives, aligning with the fact that 98% of S&P 500 boards already fulfill the recommended diversity criteria.
Despite criticism from various Republican officials for focusing on environmental, social, and governance (ESG) issues, Vanguard and BlackRock emphasize prioritizing returns over ESG concerns.
Vanguard notably did not support any of the 400 environmental or social shareholder resolutions in the U.S. last year, and its updated guidance also eliminated examples of such resolutions it might endorse, a decision aimed at clarifying its stance on ESG issues. We’re trying to provide clarity to people who have concerns, whether they are pro-ESG or anti-ESG, said Galloway.