January 26, 2013
Genocide-Free Investing Proposal on Proxy Ballot at Franklin Templeton
by Robert Kropp
For the first time in at least 19 years, investors in the mutual fund will vote on a shareowner
resolution, calling on the company to adopt policies to avoid investing in companies that
contribute to genocide.
Despite their financial power and influence, accounting for almost $12 trillion in assets under
management, mutual funds are not legally bound by Securities and Exchange (SEC) regulations
requiring corporations to hold annual general meetings at which resolutions can be introduced and
voted on by shareowners.
Even though the 2012 Trends Report from US SIF: The Forum for Sustainable and Responsible
Investment indicates "a dramatic increase in the number of mutual funds that consider corporate
governance criteria or avoid companies doing business in the Sudan"—in fact, "Sudan-related
investment policies are the most prevalent ESG (environmental, social, and corporate governance)
criteria incorporated into investment management," US SIF found—investors in mutual funds often
have no idea that their investments are supporting companies like PetroChina that actively help the
regime there maintain its violent campaign against the people of South Sudan.
A case in
point is Franklin Templeton, one of four financial firms—JPMorgan Chase, Fidelity, and Vanguard are
the others—that together have holdings of $9 billion in PetroChina, Sinopec, and other oil
companies whose payments to Omar al-Bashir's government help fund ongoing crimes against humanity.
Franklin Templeton alone holds almost 1.5 billion shares in PetroChina, accounting for seven
percent of the Chinese oil company's outstanding shares.
As it turns out, Franklin
Templeton is holding an annual general meeting this year, on March 13th, and shareowners led by Investors Against Genocide
(IAG) have submitted a resolution—"the first shareholder proposal to appear on the company's
proxy ballot in nineteen years and possibly the first ever," according to an IAG press
release—requesting that the mutual fund's board of directors "institute transparent procedures to
avoid holding or recommending investments in companies that, in management's judgment,
substantially contribute to genocide or crimes against humanity, the most egregious violations of
Arguing "that there are many different perspectives and opinions on the
best way to approach this and similar issues," the company opposes the proposal, stating, "We
believe that fostering economic and business development through investment can often help in
Three senior executives collectively own 32% of the mutual fund's
outstanding shares, and 35 local and national human rights and religious groups, along with
genocide and corporate governance scholars, wrote an open letter to them this week, requesting that
they support the shareowner proposal.
"We are concerned that management's opposition to
the proposal, combined with the many institutional shareholders that will follow your
recommendation, will dramatically skew the vote against the wishes of average investors," the
letter states. A 2010 study by KRC Research reported that 88% of respondents want their mutual
funds to be genocide-free, and 84% said they would withdraw investments from financial institutions
that do business with companies that support genocide.
"We are appealing to you directly,
in advance of the proxy vote, to institute transparent procedures to avoid holding investments in
companies that, in management's judgment, substantially contribute to genocide or crimes against
humanity, the most egregious violations of human rights as stated in the shareholder proposal," the
During the 2012 proxy season, a shareowner resolution addressing
genocide-free investing at the ING Emerging Countries Fund won 59.25% of votes, with only 10.8% of
the fund's shareowners voting against the proposal. Also, support for a similar proposal at JP
Morgan Chase increased over 2011 during last year's proxy season.
Engagement by IAG and
its allies led Teachers Insurance and Annuity Association - College Retirement Equities Fund
(TIAA-CREF) and American Funds to sell their holdings in PetroChina and other companies associated
with the Sudanese regime, and adopt policies addressing the issue.