Home' Trinidad and Tobago Guardian : May 25th 2014 Contents MAY 25 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
INTERNATIONAL | SBG23
NEW YORK--- Do you think a particular
CEO makes too much money?
Would you like to replace the directors
who signed off on that salary? Or to vote
on a company s environmental policy?
If you own stock in a company, you get
such opportunities. Every year, companies
open the polls at their annual meetings,
and shareholders elect directors to the
board and vote on various policies. At
Bank of America s meeting earlier this
month, for example, shareholders weighed
in on executive compensation and whether
to force the bank to tally its impact on
But investors who prefer owning mutual
funds to individual stocks don t get to
vote. Instead, the managers of their mutu-
al funds do, carrying the weight of all the
investors in the fund. Roughly half the
companies in the Standard & Poor s 500
index hold their annual meetings in May,
so many of those votes are occurring now.
Investors can see how their mutual
funds voted on issues over the prior year:
Funds typically list their voting results
on their Web sites, and they also file doc-
uments with the Securities and Exchange
Commission detailing their choices.
Because fund managers would rather
spend time buying and selling stocks than
studying proposals for each corporate
meeting, many funds hire an advisory
firm to help them. Institutional Share-
holder Services, better known as ISS, is
such a company. It has about 1,700 clients
and issues vote recommendations on
nearly 39,000 companies around the
The votes cast by mutual funds carry big weight.
Vanguard, which controls more than US$2 trillion
in assets, is often a company s largest shareholder
after totaling the investments across all of its
funds. Vanguard and other large fund families say
they vote based on what will drive the best long-
term value for their investments. Vanguard prefers
that the majority of directors on a company s board
be independent of management, for example.
Consider UPS, in which Vanguard funds col-
lectively own about 5.1 per cent of the outstanding
shares, according to FactSet. Last year, Vanguard s
Total Stock Market Index fund---the largest mutual
fund with US$323.7 billion in assets ---voted for
a proposal to make all shares of stock have the
same voting rights.
The fund s managers were hoping to replace the
current system under which some UPS shares
carry greater influence, with 10 votes per share.
The fund voted against the recommendation of
UPS management, though the proposal failed to
pass. The fund also voted for all 12 of the nominees
that management had recommended for its board
At Leggett & Platt, which makes mattress inner-
springs and other products, Vanguard s Total Stock
Market Index fund last year voted for a proposal
to explicitly prohibit discrimination based on sexual
orientation and gender identity at the company.
The vote was against the recommendation of the
company s management, which said that it is
already an equal-opportunity employer. The com-
pany also said that it believes written policies
should specifically list only the types of discrim-
ination prohibited by federal law. The proposal
failed to pass.
Vanguard, though, acknowledges that "it would
be exceedingly difficult, if not impossible" to
reflect the social concerns of all its shareholders
while maximising returns. It suggests investors
who want to put more emphasis in their portfolio
on humanitarian, ethical and environmental con-
cerns to look to specific kinds of mutual funds,
ones that are typically called sustainable or socially
responsible mutual funds.
These funds make it part of their investment
philosophy to emphasise issues like executive com-
pensation, climate change and human rights. For
example, Calvert Investments focuses on sustain-
able investments and says it allocates its US$13
billion in assets for both principle and perform-
Calvert identifies companies that it sees as
strong in business ethics, environmental standards
and other issues. It invests in them and tries to
highlight those companies as leaders to others at
conferences or in meetings with other CEOs.
It also makes proposals to try to advocate for
corporate policies: It was among the investors who
called upon Bank of America to tally the greenhouse
gases produced by companies and projects for
which it s a lender. The proposal failed to pass on
Sustainable-investing funds may also own stocks
that may surprise some environmentalists, such
as Exxon Mobil, Royal Dutch Shell and utility com-
panies that burn a lot of coal. Calvert says it owns
such companies in hopes of building long-term
relationships and driving change.
Over the years, corporate America has grown
more willing to talk with investors about such
issues, says Stu Dalheim, vice president of share-
holder advocacy at Calvert. That s made the job
easier for socially responsible investors, but it still
isn t easy.
"I think the trend is moving in our direction,"
Dalheim says. "There s more acknowledgment
from companies and investors broadly that sus-
tainability factors are important, but on some of
these major challenges, there s not enough
Figuring out how your mutual fund manager votes
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