Mutual funds putting 'more effort' into proxy-voting process

May 09, 2007

Shareholder proposals gain more support

NEW YORK -- Mutual funds are slowly moving toward a more reformist agenda, according to an analysis of proxy voting records on fundvotes.com, an independent project of Jackie Cook, a senior research associate with the Corporate Library.

There is a wide variation in the 80 funds she examined, but overall 22.4 percent supported corporate social responsibility (CSR) proposals last year, up from 15.5 percent in 2004 and 15.1 percent in 2005. Corporate governance proposals such as those focusing on poison pills, stock options and director elections got more support, gaining 53.5 percent of total votes last year, up from 44.4 percent in 2004 and 50.3 percent in 2005.

Some mainstream funds like Federated, Berkshire and Blackrock still almost always side with management against resolutions that advance a governance or social agenda, the data show. On the other hand, the so-called socially responsible investment (SRI) funds like MMA Praxis and Walden support conscientious proposals in huge numbers.

But some, like Bridgeway, fall in the middle range, showing significant support for some of the changes sought. 'What has jumped out at me is the heterogeneity in patterns of voting by so-called mainstream funds,' Cook says.

Cook's analysis covers voting decisions of these 80 funds on about 2,000 CSR and governance resolutions appearing in US public company proxy statements over the last three years. This is the only time period available since the SEC began requiring mutual funds - over the protests of the industry - to disclose their votes in N-PX filings in 2004.

Increased disclosure may have something to do with the votes getting more conscientious. 'Funds are apparently putting a lot more effort into the proxy-voting process,' Cook says.

by Anna Snider