] paid out a $130.83 dividend via Vanguard’s phantom shares distributed to employees (crew members) through the Vanguard Partnership Plan
, according to Daniel Wiener
, editor at Independent Adviser for Vanguard Investors
Wiener reports that the Partnership Plan
is Vanguard’s internal profit-sharing mechanism designed to reward all employees, from top management to phone operators, with a piece of the savings the low-cost fund provider generates each year.
The program is based largely on assets under management, according to Wiener, rather than performance, and factors in the “cost savings” accrued by comparing Vanguard’s average operating expense ratio to industry averages. He adds that the plan "pays out millions of dollars a year to Vanguard’s top dogs, while limiting most employees to a bonus that is capped at 30% of base compensation."
Wiener also notes that since its creation by Jack Bogle
in 1984, dividends from the plan have compounded at a 13.9 percent annualized rate, higher than the 10.4 percent annualized return from Vanguard’s flagship 500 Index
Moreover, Wiener writes, Vanguard’s executives earn the bulk of their compensation (90 percent or so) from the Partnership Plan
"A 12% raise ain’t bad in my book. While Vanguard doesn’t make disclosures about executive compensation, even though you and I are shareholders, I’ve done some calculations based on disclosures made years ago about Vanguard comp and it’s a good bet that Chairman Bill McNabb is now taking home between $5 million and $10 million per year with my estimate closer to the high end of that range," he writes.
Wiener expects 2013 to be another "windfall" given the year's flows so far.
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