Vanguard Investment Stewardship Insights Voting Insights: Independent Chair Proposal and Lobbying Disclosure at Dominion Energy
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Vanguard Investment Stewardship Insights Voting Insights: Independent chair proposal and lobbying disclosure at Dominion Energy May 2021 Vanguard publishes Investment Stewardship Insights to promote good governance practices and to provide investors and public companies with our perspectives on important governance topics and issues that come up for shareholder votes. Analysis and voting rationale Company: Dominion Energy Inc. (Dominion) Vanguard has held meaningful engagements with members of Meeting date: May 5, 2021 Dominion’s board over many years, including several discussions Proposals: Item 4—Report on Lobbying Payments and Policy; this past year that covered oversight of climate-related strategy Item 5—Require Independent Board Chair and risks. In our latest engagement, board members provided details on several recent enhancements to the governance process, namely: How the funds voted • Separation of the nomination and governance committee At the annual meeting for Dominion Energy, a from the compensation and talent management committee U.S.-based utility company, the Vanguard funds voted against two shareholder proposals. The first • Transition of the audit chair responsibilities away from proposal requested that the board annually publish a report the lead independent director so that person can focus on outlining its oversight of political lobbying activities and the oversight responsibilities company’s lobbying expenditures. The second proposal requested • Succession planning in the wake of the company’s recent that the board adopt a policy that an independent director serve leadership announcements as board chair. We appreciated that the board was receptive to shareholder feedback in implementing these changes. In particular, we Vanguard’s principles and policies were encouraged by the clarity in board committee and role A company’s board of directors should be independent, diverse, structures, the additional attention paid to succession planning, and capable of overseeing strategy and material risks. and the strengthened role of the lead independent director. In light of the company’s recent changes, the Vanguard funds did A company’s political lobbying activity is one of the many not support the shareholder proposal seeking an independent potential material risks that an independent board must oversee. chair, as we do not believe it is warranted at this time. Vanguard believes that poor governance of lobbying activity, coupled with misalignment to a company’s stated strategy or Dominion also received a proposal seeking more comprehensive a lack of transparency about the activity, could manifest into disclosure of its lobbying activities, both direct (hiring lobbyists financial, legal, and reputational risks that can affect long-term to influence legislation) and indirect (informing public opinion value for Vanguard funds. by supporting third-party organizations). Strong independent leadership is a responsibility of a company’s We evaluated Dominion’s disclosures relative to its peers and board. The Vanguard funds will consider supporting proposals industry standards; our analysis showed that its disclosures seeking an independent chair if we believe that there has been were comparable and that, directionally, Dominion continues to a material failure in risk oversight and that the role will enhance make progress in improving its approach. We gave the board a company’s board leadership and benefit shareholders. feedback that the company could further enhance its disclosures For institutional and sophisticated investors only. Not for public distribution. by more clearly demonstrating how its federal and state What we expect from companies on this matter lobbying expenditures and trade association memberships On behalf of Vanguard funds, we expect boards to represent align with the company’s climate-related positions, strategy, the interests of all shareholders and to make independent and ambitions. decisions about a company’s leadership, strategy, and risks to long-term value. Before the shareholder meeting, Dominion filed a revised policy document regarding its political contributions and lobbying; We also expect boards to oversee corporate political activity the document demonstrated directional consistency with the across their enterprise and to communicate the company’s shareholder proposal’s requests and sufficiently addressed philosophy and policies to investors. We look for companies to Vanguard’s feedback. Because of this update, and because disclose the oversight policies and structures they have in place of the board’s responsiveness to shareholder feedback, the to ensure the political activity’s alignment with the company’s Vanguard funds did not support the shareholder proposal this philosophy and long-term strategy. year. Vanguard will continue to monitor Dominion’s progress consistent with industry standards and expectations. INSDOM_052021 © 2021 The VanguardFor institutional Group, Inc. and sophisticated investors only. 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