How Well Does Running Vanguard Pay?

With $3.9 trillion in assets under management, index fund pioneer Vanguard Group is an influential shareholder, able to weigh in on how executives across corporate America should be paid. At the same time, because of its unique corporate structure, Vanguard itself has legions of indirect owners—including retirement investors who have poured money into such funds as the Vanguard 500 Index and Vanguard Total Stock Market Index. The company is owned by its funds, which in turn are owned by their investors. Yet Vanguard has been able to keep its own management’s pay private, including that of Chief Executive Officer Bill McNabb.

In early 2015, McNabb penned letters to boards at Vanguard’s 500 biggest holdings—the company owns about 5 percent of every publicly traded U.S. business—explaining his thoughts on governance and encouraging them to pay “sensible compensation tied to performance.” While the Valley Forge, Pa.-based money manager votes to approve the vast majority of executive pay programs, it has hundreds of discussions with members of boards each year about executive compensation and governance.