Two of the larger mutual funds, Fidelity and Vanguard, reportedly vote against proxy access for their investors as shareholders in the corporations in which the funds invest the shareholders’ money. Proxy access is shorthand for shareholders having the opportunity to nominate directors.
Fidelity in particular confirmed to a reporter through a spokesperson that its policy against having its investors nominate directors is so entrenched, that it opposes shareholder access even when shareholder access is supported by a given company’s management. Gretchen Morgenson, “Fair Game / The Giants That Keep Insiders In,” p. 1, col. 4 (New York Times Nat’l ed., “SundayBusiness” Section, Sunday, May 31, 2015).
A position against shareholder access raises issues concerning fiduciary duties:
Institutions that vote against proxy access, some investors say, are preserving the status quo in corporate boardrooms, where there is little accountability on outsize executive pay, director diversity and other governance issues. And such a position is even more troubling when it is taken by an institution that has a fiduciary duty to do the right thing by its investors.
Id. [Emphasis added.]
There may be a reason that supports the funds’ position against shareholder access, however. It would be good to ask the funds this question:
How is it in the interest of your investors to deny them the opportunity to nominate directors in the corporations in which you invest their money?
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015). Mutual funds purchase commercial paper of all kinds including mortgage loans. Fiduciary claims are among the claims usually alleged in forced placement practices cases involving mortgage loans.