Mutual fund directors are either not being paid nearly enough for what they should be doing—or far too much for what they actually do.
– Jack Bogle, SmartMoney, July 2012
Here’s a simple question:
Vanguard’s directors are tasked with watching over trillions of other people’s dollars. But are they investing alongside the shareholders they represent—and, even more to the point, are they even paying attention? Or, as Vanguard’s founder Jack Bogle might’ve asked: Are they being paid far too much for what they’re doing, or not being paid enough?
Incredibly, Vanguard has said that requiring directors to own shares in the funds they oversee would be merely “window dressing.”
How, then, can we make sure directors are doing their job? Vanguard has said it’s the responsibility of shareholders to hold directors accountable. But, of course, Vanguard’s shareholders have no say or knowledge of what directors are doing since disclosure runs from minimal to none.
Maybe you agree with Vanguard, but for me, it’s pretty straightforward: When I put my hard-earned money to work, I want to see that the people responsible (the managers and board of directors) are also invested in the fund. Or, as my mentor likes to ask, “Are they eating their own cooking?”
I firmly believe that’s an important question—it’s why I report on this every year and maintain a detailed table showing director ownership fund by fund here.
So, let’s follow the money and see what it says. Spoiler alert: If you agree with my premise that we’re in this boat together, then you probably aren’t going to like the answer.
But first, let me provide a quick update on Vanguard’s board of directors, as there has been some musical chairs this year.
Board Update
Lubos Pastor, a finance professor at the University of Chicago Booth School of Business, joined Vanguard’s board of directors on Monday, January 1.
In May, Deanna Mulligan resigned from Vanguard's board of trustees after just six years at the table—she joined at the start of 2018.
John Murphy, President and CFO of Coca-Cola, joined Vanguard’s board on June 1.
Tim Buckley’s last day as Vanguard’s CEO and chairman was July 7. On July 8, longtime board member Mark Loughridge became the board’s first independent chairman. Salim Ramji (Vanguard’s new CEO) and Greg Davis (the firm’s CIO and President) joined the board on July 8.
Vanguard hasn’t described it this way, but I see Murphy as a replacement for Mulligan, while the additions of Ramji and Davis are related to Tim Buckley’s resignation.
After all of the changes, Vanguard’s board consists of 14 individuals.
Could more changes be coming? Assuming that Vanguard is serious about upholding an internal pledge (allegedly made in 2021) to achieve gender parity on its board by 2028, we can expect the game of musical chairs to continue—only two women sit on Vanguard’s board of directors today.
A Good Gig, If You Can Get It
If you have any doubts, rest assured that Vanguard’s board members are well compensated for their time—between $330,000 and $400,000 each in 2023. (Grant Reid was paid $188,572 in 2023 after joining the board midway through the year.) Vanguard’s longest-tenured director, Andrè Perold, has been paid over $4.4 million since joining the board in 2004.
The board members have lost out to inflation, as their pay has stayed the same since 2021. But given that they still earn around seven times the median annual salary, well, we don’t need to shed any tears for them. And yes, the board members are motivated to come to meetings and give some thought (we shareholders hope) to the decision-making process at the Vanguard Group.
But as I said, I’m interested in more than their annual compensation. I want to know how much they have invested in the funds they oversee on our behalf.
Finding the Figures
Compiling the data on Vanguard’s directors’ investments is difficult, as it is only disclosed in bits and pieces over the year. You can find the raw data in the Statement of Additional Information, a separate but component document of each fund’s prospectus. It’s laborious. Don’t worry, I’ve done the work for you.
Most of the data here is reported through the end of 2023, but a handful of funds are still reporting data as of 2022.
This means I have incomplete data for Lubos Pastor, who joined the board at the start of the year. In the following analysis, I assume Pastor was not an investor in any of the funds for which I don’t have data yet.
I also don’t have any information on Vanguard’s newest board members, John Murphy, Greg Davis and Salim Ramji. I’ve excluded them from the analysis for now but will be on the lookout next year to see how much of Vanguard’s fixin’s they’re eating.
Based on the available information, Vanguard’s 11 individual board members (excluding Murphy, Davis and Ramji) own Vanguard funds totaling anywhere from as little as $100,003 to $1.9 million. These are minimums.
Why do I say these are minimums? Chalk it up to loose disclosure requirements. Board member ownership must only be reported in five categories: $0, $1–$10,000, $10,001–$50,000, $50,001–$100,000 and over $100,000. Plus, Vanguard must only report these amounts annually when they review and renew their fund prospectuses, so, as I said, we still don’t have all of 2023’s data.
In calculating those “minimums,” I assumed that each director was at the low end of the stated range for each of their holdings. For those with between $50,001 and $100,000, I assumed $50,001 as a minimum. For holdings “over $100,000” invested, I assumed $100,001.
Before getting to the actual numbers, let me be clear: This is one area where Vanguard could step up and be an industry leader.
Vanguard discloses the information that is required of them. But why not be more transparent? Why not make this data more accessible to the individual investors and, yes, company shareholders that Vanguard claims to serve? For example, how about sharing the ownership stats for each new board member when they join the board?
Vanguard always talks about how the shareholders of the funds own the firm. Why do we, the owners, have to work so hard for this information?
Spreading the Wealth?
So, what do the numbers tell us about how Vanguard’s directors invested their Vanguard money at the end of 2023?