Saturday, 24 March 2007

Shareholder voting disclosure in the US starts to have an impact

Thanks again to Oliver for sending me this piece from about the voting records of US shareholders. I'm putting up a large chunk of the article because it's free access anyway, the full article is here. The article argues that disclosure is forcing fund managers to take a more considered position on shareholder resolutions that address corporate social responsibility issues.

Apparently, the rubber stamp is dying a slow death. Optimists predicted that the SEC rule requiring mutual funds to disclose their proxy voting records starting in August 2004 would deter funds from reflexively voting with company recommendations--which almost invariably suggest voting against shareowner resolutions. Research on fund voting on corporate social responsibility (CSR) resolutions addressing social and environmental issues provided to by Jackie Cook, a senior research associate with The Corporate Library (TCL), provides a more realistic perspective. This data complements research Ms. Cook conducted for a recent TCL report on voting by 29 large mainstream funds on corporate governance resolutions that examined over 6 million voting decisions parsed from over a thousand N-PX filings, the SEC form where funds disclose annual proxy voting records.

According to the data on CSR resolutions, funds are collectively inching their way toward more conscientious voting. Ms. Cook analyzed 592 CSR resolutions that elicited more than 24,000 voting decisions over the past three proxy seasons by 60 fund families (up from the 45 fund firms Ms. Cook analyzed last year for She found that overall support for CSR resolutions fell from 15.7 percent in 2004 to 14.8 percent in 2005, then rose to 21 percent in 2006.

Support for CSR resolutions by the 52 mainstream funds surveyed fell slightly from 2004 (7.8 percent) to 2005 (7.7 percent) before rising to 13.4 percent in 2006. The eight socially responsible investing (SRI) funds surveyed showed much more robust support for CSR resolutions-- from 68 percent support in 2004 to 61.9 percent in 2005 to 71.8 percent in 2006.

"Looking at the big picture tells an incomplete story--a closer examination reveals several layers of complexity," Ms. Cook told "For example, the progress made overall comes despite significant lagging by some of the largest firms."

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