Fund Industry Pans Proxy Vote Disclosure Proposal
A proposed regulation requiring mutual funds to disclose their proxy voting policies and procedures is drawing a generally unfavorable response from the mutual fund industry.
“We take the position that a rule requiring a funds proxy voting record to be disclosed would not benefit the majority of shareholders,” says John Collins, a representative of the Investment Company Institute, Washington.
“The case hasnt been made that mandatory disclosure would benefit shareholders,” he adds.
But according to Bill Patterson, director of the Office of Investment for the AFL-CIO, Washington, disclosure is vital.
Mutual funds, he says, are now under no obligation to disclose to their investors the principles they use when voting on such matters as mergers, the election of corporate directors and executive compensation arrangements.
This, Patterson says, makes it impossible for a mutual fund investor to select a fund whose philosophy of ownership fits with the investors.
The AFL-CIO says some 29% of union households own mutual funds.
The AFL-CIO filed a petition for rulemaking with the SEC asking for the mandatory disclosure.
Another petition was filed by Domini Social Investments, New York, which says it was the first mutual fund manager in the United States to publish its annual proxy votes.
In its filing, Domini Social Investments Founder and Managing Principal Amy Domini, says the manner in which mutual funds exercise their proxy voting responsibilities should be considered a fundamental indicator of responsible mutual fund governance.
“We believe that the current approach taken by most mutual fund companies in not disclosing their policies or votes should be considered an abdication of the fiduciary responsibility,” Domini says.
“To argue that ordinary investors are not demanding this information is surely beside the point, and this has never been the sole basis or even a primary reason for disclosure,” she adds.
In a great many cases, Domini says, ordinary investors are probably unaware of what they are missing, and thus, not in a position to demand it.