HONG KONG
        

Our four pillars

Vanguard's core values of focus, integrity and stewardship are reflected every day in the way that we engage with our clients, our crew and our community. We view Investment Stewardship as a natural extension of these values and of Vanguard's core purpose. What does great corporate governance look like? Vanguard's four pillars of governance frame our thinking.

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Good governance begins with a great board of directors. Our primary interest is to ensure that the individuals who represent the interests of all shareholders are independent (both in mindset and freedom from conflicts), capable (across the range of relevant skills for the company and industry) and appropriately experienced (so as to bring valuable perspective to their roles). We also believe that diversity of thought, background and experience, as well as of personal characteristics (such as gender, race and age), meaningfully contributes to the board's ability to serve as effective, engaged stewards of shareholders' interests. If a company has a well-composed, high-functioning board, good results are more likely to follow.

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We believe in the importance of governance structures that empower shareholders and ensure accountability of the board and management. We believe that shareholders should be able to hold directors accountable as needed through certain governance and bylaw provisions. Among these preferred provisions are that directors must stand for election by shareholders annually and must secure a majority of the votes in order to join or remain on the board. In instances where the board appears resistant to shareholder input, we also support the right of shareholders to call special meetings and to place director nominees on the company's ballot.

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We believe that performance-linked remuneration policies and practices are fundamental drivers of the sustainable, long-term value for a company's investors. The board plays a central role in determining appropriate executive pay that incentivises performance relative to peers and competitors. Providing effective disclosure of these practices, their alignment with company performance and their outcomes is crucial to giving shareholders confidence in the link between incentives and rewards and the creation of value over the long term.

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Boards are responsible for effective oversight and governance of the risks most relevant and material to each company in the context of its industry and region. We believe that boards should take a thorough, integrated and thoughtful approach to identifying, understanding, quantifying, overseeing and – where appropriate – disclosing risks that have the potential to affect shareholder value over the long term. Importantly, boards should communicate their approach to risk oversight to shareholders through their normal course of business.