Words are important but actions matter more.

Vanguard late last week issued its 2019 annual stewardship report, and noted this year that it wants more diversity among corporate America’s boards of directors.

However, in one fund at least, Vanguard’s voting record tells a different story.

Here’s what Vanguard wrote in its full stewardship report, which is available online at its website: “We are expanding our focus to more explicitly urge boards to seek greater diversity across a wide range of personal characteristics, such as gender, race, ethnicity, national origin, and age,” Vanguard said.

The $5 trillion-plus-in-assets mutual fund giant also issued a separate note, adding, “We continue to promote gender diversity — there is still progress to be made — but our research and experience with corporate boards tell us that gender diversity is not enough. The effective boards of today and tomorrow should reflect all facets of diversity, and we are calling for greater progress on this front.”

Fair enough. So let’s take a look at Vanguard’s voting record on its well-known S&P 500 index fund.

On gender pay gaps, board diversity

The flagship Vanguard S&P 500 index fund, created by Vanguard founder John C. Bogle, was the first fund to allow retail investors broad participation “in the market,” and has grown to hundreds of billions of dollars in assets.

Yet on shareholder proposals to disclose diversity of board or employee ranks, Vanguard voted every time “against" the proposal, and “for” management.

In the case of Apple, for example, shareholders put forth a proposal to “disclose board diversity and qualifications."

Vanguard voted “against.” Same for Discovery Inc., ExxonMobil, Fastenal, Salesforce.com, Starbucks, Home Depot, and Travelers Co. In the case of Facebook, Vanguard voted twice “against” a board diversity shareholder proposal and an employee diversity report proposal.

Vanguard’s one exception was “for” a vote on a diversity report in the case of Newell Brands.

How about a potential pay gap between male and female workers?

This year, Intel said it reached pay equity for all male and female workers, taking into account base salary, bonuses, and stock-based compensation. Salesforce told the Wall Street Journal an algorithm helped analyze employee compensation and equal pay across the firm to ensure workers are on equal footing.

Citigroup disclosed that female employees at the bank earned 29% less than men, without adjusting for such factors as job title or seniority. That was in response to a request for pay transparency by investment firm Arjuna Capital.

Yet, on proposals to examine gender pay gaps, Vanguard voted “against” them at S&P 500 index companies where shareholders asked for these reports.

Shareholders at Adobe, Alphabet, Amazon, American Express, Bank of America, Cigna, Facebook, Intel, JPMorgan Chase, Mastercard, Oracle, Bank of New York Mellon, and Wells Fargo put forth proposals in the most recent proxy voting season for transparency on the gender pay gap.

That may change as Vanguard outsources some of its proxy voting to its external managers of some mutual funds.

For those who want to look up specific mutual funds, Vanguard’s website has a handy list of how the funds voted here: https://about.vanguard.com/investment-stewardship/how-our-funds-voted/.

As of the end of 2019, Vanguard’s 25 external managers will have full voting power over shares in the mutual funds they manage. Wellington Management, for instance, the outside money manager that manages mutual funds for Vanguard, will vote independently.

Vanguard said this last year that it engaged with 868 companies, and voted on 169,746 proposals with $2.27 trillion in equity assets under management.

“How do companies balance profits and social purpose? And should you? Is that reality?” asked Eve Tahmincioglu, executive editor of Directors & Boards magazine, based in Philadelphia.

Directors & Boards will host a November forum, "The Character of the Corporation: How companies can balance profits and social good,” to discuss how corporations go about considering all stakeholders — community, employees, environment, etc. — not just stockholders.. Delaware Chancery Court Justice Leo Strine and SEC Commissioner Robert Jackson will be speakers. Here’s a link to the event: https://esg.directorsandboards.com.

“Short-termism versus long-termism is the issue," she said. “If Vanguard invests for customers’ future, they want these companies to be around and producing profits in the years to come.”