Rockefeller & Company
Socially Responsive Investment Division
December 5, 2002
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street NW
Washington, D. C. 20549-0609
Dear Secretary Katz:
On behalf of Rockefeller & Company's Socially Responsive Investment Division, we would like to express our strong support of the Security and Exchange Commission's proposed rules regarding proxy voting disclosure by mutual funds and investment advisers. We are delighted that the SEC is taking this important step in promoting fuller disclosure and transparency in the financial markets, especially at a time of such low investor confidence due to the corporate scandals of the past year. We would like to offer some specific comments in support of these proposed rules as well as some suggestions for strengthening them.
As you may know, Rockefeller & Co. has been in the investment business for over a century and has a rich history of socially responsive investing. Originally founded as a family office by John D. Rockefeller in 1882, the company now serves a wide variety of clients and manages approximately $3 billion in assets. Our Socially Responsive Investment Division was started in the 1970s and is one of the oldest SRI efforts in the industry. In addition to managing our own clients' investments, we also serve as a sub-advisor on two SRI mutual funds.
We have always considered proxy voting one of our most important fiduciary duties and have strived to vote all proxies in accordance with our clients' best interests as shareholders. It has also been our department policy to provide proxy voting records to our clients upon request and we fully endorse the Commission's proposal to make such disclosure mandatory. We do not consider this to be overly burdensome (as some opponents of the rules have suggested) and we have long believed that the disclosure rules for mutual funds and investment advisers should be the same as for pension funds (already required under ERISA guidelines). In all cases, it should certainly be the prerogative of the clients being served to know how well their shareholder interests are being represented in the proxy voting process. It is their money and they do care!
We are in fact writing this letter partly on behalf of our many clients who have expressed concerns to us regarding these issues. We are also writing in support of our many colleagues in the SRI industry who have already submitted detailed comments to the Commission. In particular, we would like to express our endorsement of the comments submitted by the Social Investment Forum, Domini Social Investments, Walden Asset Management, Calvert Social Research, and Pax World Funds. They have articulated in detail the many important issues related to these proposed rules and made many excellent suggestions for additional reform.
Listed below are the most important points which we would like to have on record regarding the SEC's proposed rules and our support thereof:
- Proxy voting is the primary method by which shareowners participate in the governance of the corporations they own. Mandatory disclosure of proxy votes will help insure that mutual fund managers and investment managers fulfill their fiduciary obligation to vote their clients' proxies in their best interests as shareholders.
- The proposed disclosure rule will help reduce conflicts of interest faced by mutual fund managers who manage (or seek to manage) retirement fund assets of the very corporations which they hold in their mutual funds. Transparency will enable shareholders to see whether the mutual funds are succumbing to pressure to vote with company management or are accurately representing shareholder interests.
- Disclosure of voting guidelines and proxy votes will enable investors to make more informed decisions when choosing a mutual fund manager.
- The proposed rule will properly align the fiduciary standards governing proxy voting by mutual funds and investment advisers with those already in effect for pension plans.
- Disclosure will encourage better corporate governance by making both corporations and mutual funds more responsive to shareholder concerns.
In addition, we would like to endorse the following proposals which could strengthen the proposed rules and provide even greater transparency to the financial markets:
- We would like the rule to require that disclosure of proxy voting policies and voting records be made in a more accessible manner so as to be more useful to investors and shareholders. We think that website posting should be required and that executive summaries in simple English should also be available to clients.
- We believe the SEC should provide more specific guidance regarding proxy voting guidelines so that they are truly informative rather than merely pro forma. We suggest that there be some mandatory not just "suggested" categories of disclosure listed in the Rule so that there will be more uniformity among different funds' guidelines.
- We recommend that the 3-day mailing rule be extended to 7 days to give mutual funds more time to respond to requests for proxy information. This would be in line with the current ruling on prospectus delivery.
- We recommend that the Commission adopt uniform formats for disclosure for investment advisers (File No. S7-38-02; Release No. IA-2059) and mutual funds, there being no difference in the fiduciary obligations to either type of client.
In summary, we applaud the Commission's foresight in proposing these rules and believe that their quick passage will be an important step in restoring investor confidence in the financial markets, reducing conflict-of-interest problems in the mutual fund industry, and strengthening shareholders' ability to hold corporations more accountable on governance, social, and environmental issues.
Thank you for the opportunity to comment on these proposed rules.
Farha Joyce Haboucha, Co-Director
Socially Responsive Investment Division
Rockefeller & Co., Inc.
cc: Commissioners Harvey Goldschmid, Roel Campos, Paul Atkins, and Cynthia Glassman.