I work for a large "non-profit" hospital . The executives all receive bonuses based on the profits of the organization. The middle management get bonuses based on the profits of their units. They certainly don't return the money to their patients and the insurance companies.I disagree with a lot of the discussion. Vanguard is very much like a non-profit, in that any profits from the parent would go to the underlying funds to reduce expenses. The parent and the funds do not make a "profit" because there is no owner to distribute the profit to (other than to the shareholders in the form of reduced costs). That doesn't mean they don't pay excessive salaries or have excessive costs, like any other non-profit. Vanguard's goal is not to make a profit for its owners, but to cover its costs.
From the customers point of view, what matters is its cost advantage. Other funds run by for-profit entities (Like Fidelity, which is family owned, or Schwab, which is public) may be able to match Vanguard's costs due to efficiency, or loss leaders, or other factors, but not having to earn a profit provides a competitive advantage which is generally apparent in their expense ratios.
Lady Geek is right that unlike a true mutual company owned by shareholders, Vanguard's shareholders have no say in operations. Because the funds (not the shareholders) own Vanguard, they have insulated themselves from shareholder dissatisfaction, although corporate shareholders don't have much real say either.
Your second paragraph is belied by the fact that when you compare similar funds, Vanguard's expense ratios tend to be higher than Schwab's and Fidelity's.
Statistics: Posted by toddthebod — Sat Aug 17, 2024 3:44 pm