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March 15, 2013
15 Million Shares Vote for Genocide-Free Investing Proposal at Mutual Fund
    by Robert Kropp

Investors Against Genocide calls on Franklin Templeton to adopt a policy against investing in companies whose operations contribute to genocide.


Franklin Resources, the parent company of the mutual fund family Franklin Templeton, doesn't face shareowner resolutions very often. In fact, a resolution filed this year by Investors Against Genocide (IAG) is the first in at least 19 years, and may well be the first ever.

The mutual fund company owns seven percent of the outstanding shares in PetroChina, the oil and gas company whose operations contribute to the genocidal campaign of Omar al-Bashir's government. "Ongoing government-sponsored genocide in Sudan has spanned more than two decades and resulted in the death of over 2.5 million innocent civilians," IAG stated.

The resolution filed by IAG and its shareowner allies requested 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 human rights."

Franklin Resources held a general meeting yesterday, where 8.7% of shareowners—nearly 15 million votes—supported the proposal. If abstentions and broker non-votes were excluded, the percentage of votes supporting the proposal would be substantially higher. In any case, under Securities and Exchange Commission (SEC) rules the percentage in favor was easily high enough for the resolution to be included on the company's next proxy ballot.

Despite their financial power and influence, accounting for almost $12 trillion in assets under management, mutual funds are not legally bound by SEC regulations requiring corporations to hold annual general meetings at which resolutions can be introduced and voted on by shareowners.

The vote total is especially striking given that three senior executives at Franklin Resources collectively own 32% of the company's outstanding shares. Despite a letter sent by 35 local and national human rights and religious groups, along with genocide and corporate governance scholars, to the three executives, urging them to support the proposal, the company recommended that shareowners vote against it. "We believe that fostering economic and business development through investment can often help in achieving reforms," the company stated.

Speaking in favor of the proposal at the meeting, Armen Carapetian of the Armenian National Committee of America took issue with the company's argument. "In some cases, that statement would be correct," Carapetian said. "However, it is inappropriate and certainly does not apply to the genocidal regime in Sudan that has resisted international condemnation for 10 years and continues its genocide and crimes against humanity against its own people in Darfur and recently in the Nuba Mountains and Blue Nile states."

In 2012, after the board of ING Emerging Countries Fund took a neutral position on a similar proposal, almost 60% of shareowners voted in favor of it. And in 2009 the Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), a $400 billion financial services firm, divested its holdings in four of the five major Asian state-owned oil companies with significant operations in Sudan.

According to IAG, four financial firms—JPMorgan Chase, Fidelity, Vanguard, and Franklin Templeton—together have holdings of $9 billion in PetroChina, Sinopec, and other oil companies whose payments to al-Bashir's government help fund ongoing crimes against humanity.

The 2012 Report on Sustainable and Responsible Investing Trends in the US from US SIF: The Forum for Sustainable and Responsible Investment found that more than $1.63 trillion in institutional assets are invested according to policies relating to Sudan. 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.

 

 
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