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Increasing percentage of mutual fund voting power is being exercised to vote against management
Vancouver (28 September 2010) – The Shareholder Association for Research and Education (SHARE) has just published its third annual report, Proxy Voting by Canadian Mutual Funds: A Survey of Management and Shareholder Resolutions.
The report examines how mutual funds vote their shares, and is intended to help investors understand the powerful influence their funds have on public companies. It features an analysis of four full years of data on votes cast by 258 funds managed by 21 fund companies in connection with the shareholder meetings of more than 200 senior Canadian issuers.
The report concludes that support by Canadian mutual funds for corporate management declined steadily over the four year period from 2006-2009.
Some of the key findings are:
Election of Corporate Directors
The election of corporate directors is a key topic for shareholder consideration because the people who serve on a public company’s board are vital to the future fortunes of the enterprise.
- As a group, mutual funds are increasingly less accepting of management’s board nominees.
- Votes in favour of directors from all fund companies included in the report fell from 93% in 2006 to 89% in 2009.
Voting on Executive Compensation
- Canadian mutual funds were particularly critical of management proposals on executive compensation, voting against 1 in every 5 in 2006 and 1 in 4 in 2009.
- Say on pay shareholder proposals filed at Canada’s largest banks received strong support from Canadian mutual funds with an increase from 52% in 2008 to 68% in 2009.
Environmental and Social Issues
- Mutual fund support for shareholder proposals on environmental and social issues increased from 26% in 2006 to 39% in 2009.
- SRI mutual fund companies supported 98% of the proposals that raised environmental and social matters.
SRI Funds
Although fund support for corporate management is declining, it remains very high except among funds managed by the three Socially Responsible Investment (SRI) mutual fund companies surveyed.
- SRI funds were four times more likely to reject management proposals on executive compensation than non-SRI fund families in 2009.
- The gap between SRI and non-SRI funds’ voting records on this issue has increased in the last four years.
Mutual funds vote billions of shares every year. The SHARE report points Fund unitholders cannot direct how those shares should be voted because they do not own shares directly. What they can and should do, however is examine the voting decisions of their funds on key issues identified in the SHARE/FundVotes report and let their fund companies know if they have concerns about how this important franchise is being exercised.
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE
More information:
Proxy Voting by Canadian Mutual Funds: A Survey of Management and Shareholder Resolutions.