Proxy votes still favour management

  • September 28, 2007
{mosimage}TORONTO - Is your mutual fund really on your side? A new study from the Social Investment Organization suggests most mutual funds are actually voting reflexively with management whenever investors challenge their environmental, social or corporate governance practices.

The first ever study of mutual fund proxy voting in Canada found that mutual fund managers cast their votes in favour of management and against shareholder proposals 67 per cent of the time.

Either the fund companies don’t have clear guidelines for deciding how to vote on shareholder motions or they’re not taking the time to consider the issues, according to Social Investment Organization executive director Eugene Ellmen.

“The fact that fund companies routinely vote with management and against these proposals is a testament to the fact that Canadian mutual fund companies could do much more in fulfilling their proxy voting obligations to their investors,” Ellmen said in a release.

{sidebar id=2}Not surprisingly, socially responsible investment funds swam against the current in favour of management. Inhance Investment Management was the most consistently on the side of shareholder proposals. It voted against management 100 per cent of the time.

On the other end of the scale, big conventional funds such as Dynamic Mutual Funds and Fidelity Investments Canada cast not one vote in favour of a shareholder proposal.

On average SRI funds voted 79 per cent in favour of shareholder motions and conventional funds only voted in favour of shareholder proposals 31 per cent of the time. There were exceptions to the general pattern among conventional funds, with RBC Asset Management Inc., National Bank Financial Inc., Guardian Group of Funds Ltd. and AIM Funds Management Inc. casting more than 50 per cent of their proxy votes against management.

The study looked at voting for 990 individual funds represented by 27 different mutual fund companies. Included in the group were 55 individual SRI mutual funds. The report’s authors limited the survey to 57 proxy resolutions on such issues as management compensation, splitting the roles of chair and chief executive officer, reporting on environmental impacts and human rights policy in the corporate supply chain.

Regulators should force mutual fund companies to reveal the proxy voting guidelines they give to fund managers, said the report.

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