January 11, 2014
Genocide-Free Proposal to Stay On Proxy Ballot at Franklin Templeton
by Robert Kropp
After the SEC rules against Franklin Templeton's request to have the resolution omitted, Investors
Against Genocide will return to the mutual fund family's next annual meeting and renew call for a
genocide-free investment policy.
Last year's general meeting of Franklin Resources, the parent company of the mutual fund family
Franklin Templeton, featured—for the first time in at least 19 years, and maybe the first time
ever—a shareowner resolution. Brought by Investors Against Genocide, the resolution
requested that the company'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."
According to a recent press release from IAG, Franklin Templeton “owned
1,470,026,753 shares of PetroChina, as of December 31, 2012. That holding amounted to 7% of the
shares outstanding of PetroChina, a company widely recognized as contributing to the genocide in
Despite the fact that three senior executives at Franklin Resources collectively
own 32% of the company's outstanding shares, and that the company recommended that shareowners vote
against the proposal, some 15 million share voted in favor of it. The number amounted to 8.7% of
share votes, easily enough for the resolution to be included on the this year's proxy ballot.
This year, Franklin Resources appealed to the Securities and Exchange Commission to have IAG's
resolution omitted from the proxy ballot. “The proposal,” the company's lawyers argued, “creates
precisely the kind of conflict of interest that the Courts and the Commission have historically and
consistently considered to be a breach of fiduciary duty: placing the agenda of an indirect owner
of an investment adviser (in the present case, a shareholder of the Company) above the interests of
the adviser's clients.”
In all, Franklin Resources detailed five justifications for
omitting IAG's proposal from its proxy ballot.
ruling, the SEC struck down every one of the five justifications for omitting the proposal from
the ballot, stating, “It appears that Franklin’s policies, practices, and procedures do not compare
favorably with the guidelines of the proposal and that Franklin has not, therefore, substantially
implemented the proposal.”
“The proposal focuses on the significant policy issue of human
rights and does not seek to micromanage the company,” the Commission further stated.
are gratified that the SEC has upheld shareholders’ right to vote on the important social issue of
investments tied to genocide,” IAG chairperson Eric Cohen, said. “Americans, once they become aware
of the problem, do not want their pensions and family savings connected to genocide. Although
financial institutions may oppose it, ordinary investors who see the proposal will vote their
values and support genocide-free investing.”
According to a 2010 study by KRC Research,
88% of respondents want their mutual funds to be genocide-free, and 84% said they would "withdraw
their investments from American companies that do business with companies that directly or
indirectly support genocide."
“Nonetheless,” Cohen of IAG stated before Congress in
2010, “Because most individuals entrust their savings to mutual funds, millions of Americans are
investing, unknowingly, inadvertently, and against their will, in companies funding genocide."
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.