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February 03, 2006
Using Mutual Fund Proxy Voting Data to Promote More Conscientious Voting
    by Bill Baue

The final installment of this multi-part series steps back to consider the implications of the findings and how to harness them to push mutual funds to support corporate social responsibility.

After examining 2004 and 2005 mutual fund proxy voting data provided by The Corporate Library (TCL) Senior Research Associate Jackie Cook, we return to the original question: do the SEC disclosure rules boost "incentives to fund managers to vote their proxies conscientiously?" While it would be nice to answer "yes," the data say "no," as support for resolutions filed by corporate management increased and support for resolutions filed by shareowners on corporate social responsibility (CSR), and climate change in particular, decreased.

(Read all four articles in the series here.)

From a business perspective, these trends are perplexing, given that the most comprehensive academic study of CSR, conducted by Marc Orlitzky surveying 52 empirical studies published between 1972 and 1997, found a positive association between CSR and financial performance. So mutual funds would be hard pressed to advance a business case for opposing CSR resolutions.

It is even more difficult to account for the decreasing support for climate change resolutions, given that science and popular opinion have only hardened in the past year that climate change is not only an environmental but also a significant business risk. Indeed, a survey of 845 US mutual fund investors conducted by Opinion Research Corporation (ORC) that the Civil Society Institute (CSI) released last week finds that seven out of ten respondents want their mutual funds to support climate change shareowner resolutions.

Released in conjunction with this survey was a report from Ceres conducted by the Investor Responsibility Research Center (IRRC) finding that none of the 100 largest mutual funds whose specific votes were analyzed supported any climate change resolutions in 2005. These findings largely concur with TCL data, with some differences due to the fact that Ms. Cook of TCL did not limit her dataset to the largest funds. For example, Goldman Sachs (ticker: GS) mutual funds are not amongst the Ceres dataset of the 100 largest funds, though data provided by TCL's Ms. Cook to documents a 16.7 percent decrease in support for climate change resolutions from 2004 to 2005 by the 26 GS mutual funds covered.

While Ceres President Mindy Lubber applauds Goldman Sachs' new comprehensive, corporate-wide environmental policy and its incorporation of socially responsible investing (SRI) strategies in its equities research, she expresses concern over its proxy voting on climate change proposals.

"Goldman Sachs, while putting out a valuable set of environmental guidelines for the company, has clearly not changed all of its investment practices as it relates to climate change and we look forward to continuing to work with them to see more of that incorporated into their assessment of firms," Ms. Lubber told

Chris Williams, a press officer for Goldman Sachs, told that the company declined to comment.

Co-op America coordinated with CSI and Ceres to launch a Web-based action campaign for mutual fund investors to send an electronic letter to the three largest mutual fund families (Fidelity, Vanguard, and American Funds) exhorting them to support climate change resolutions.

"These fund families collectively control $1 trillion, 70 percent of the US mutual fund market," said Alisa Gravitz, executive director of Co-op America. "The bottom line is this: mutual fund companies have the clout to hold the companies in their portfolios accountable for climate change impact, and furthermore they have a duty to do so."

"When investors learn about the dismal record mutual funds have on this important issue, they will be outraged that mutual funds have been so negligent--they will be furious because failure to take climate risk seriously is clearly dangerous to mutual fund investors as well as the environment," Ms. Gravitz added.

Within one week, more than 2,300 investors had sent letters, according to the automatic tracking tool on the Co-op America website. And this is not the only such campaign. Last year Amnesty International USA (AIUSA) launched the SharePower program, which provides tools for investors to harness their power as mutual fund shareholders to encourage proxy voting in support of human rights, and just this week Amnesty expanded the program to Canada. Mila Rosenthal, director of Amnesty's business and human rights program, expresses concern mixed with optimism regarding the trends toward decreasing support for CSR resolutions exposed in TCL data provided to

"Your analysis of the results is fascinating and shows some surprising, and in some cases disappointing short-term trends, but I think the long-term trend will be a positive one for human rights," Ms. Rosenthal told "We believe that transparency on proxy voting records will eventually push mutual funds to vote more and more positively on human rights related resolutions, as they hear from more and more individuals that these issues are important to them."

"The SharePower campaign is designed to give individuals the tools they need to communicate these values to investment companies who speak for them and their money, but SharePower is still a new initiative, and I would expect it to take a while longer for the mutual funds to get the message," Ms. Rosenthal added. "We think that within the next couple of years we'll see a more positive trend on proxy voting on social issues, as individual investors get more involved and flex their muscles."

Ms. Cook, the researcher who authored TCL's report and provided additional data from her study to, sees several ways that this information can be used to fulfill the intention of the SEC rule to promote more "conscientious" proxy voting by mutual funds.

"Shareholder activists looking to file proposals may look to previous season's results for how to make the appeal to the shareholder body--what lines of argument appeal in general to shareholder bodies and in particular to funds with large holdings in particular companies," Ms. Cook told "And shareholder activists looking to promote their proposals for upcoming votes might look to this type of data in devising a strategy for communicating their case to investment funds."

Part one of this multi-part series discusses The Corporate Libary report findings on decreasing mainstream fund support for CSR resolutions.

Part two of this multi-part series examines unpublished data to explain the apparent decrease in support for CSR resolutions by SRI funds.

Part three of this multi-part series examines unpublished data and finds decreasing support for climate change resolutions.

Editor's Note: thanks Jackie Cook for generously offering access to unpublished research data and analysis for this and previous articles.


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