SEC Proposed Rule:
Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies
and
Proxy Voting by Investment Advisers
[Release Nos. 33-8131, 34-46518, IC-25739; File No. S7-36-02] File No. S7-36-02]
and
[Release No. IA-2059; File No. S7-38-02]
The following information on Type Letter A, or variation thereof, was submitted by
53 individuals.
Subject: Proxy Voting
Form Type Letter A:
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549-0609
Cc: Mr. Harvey L. Pitt, Chairman
Dear Chairman Pitt and Secretary
Katz:
I am writing in support of the
Securities and Exchange Commission's recently proposed rules regarding proxy
voting guidelines and vote disclosure by mutual funds and investment advisers,
File Numbers S7-36-02 and S7-38-02. I congratulate the agency for instituting
meaningful disclosure that will surely bolster confidence in the equity
markets, and strongly support the recommendations set forth in these proposed
rules.
The rules are a major step forward
in providing greater transparency to investors whose proxy assets are held
in mutual funds or entrusted to investment advisers. With the proposed amendments,
the SEC is making a clear statement that proxy voting is a fiduciary duty
and should be exercised with the best interests of fund holders in mind.
This is consistent with the fiduciary standard set by the 1974 Employee
Retirement Income Security Act (ERISA), which already applies to private
pension plans.
As of last December, the mutual
fund industry had assets totaling $7 trillion. Individual investors accounted
for three-fourths of those assets (ICI Mutual Fund Fact Book). Yet even
as mutual funds hold enormous influence over capital markets, and make decisions
that can significantly impact the fortunes of individual investors, most
funds have been reluctant to disclose their proxy voting records or the
principles that guide their voting of securities.
As owners of a corporation, shareholders
have the right to participate in major policies and management decisions.
Proxy voting is a primary forum through which management seeks investor
affirmation of its policies, and where shareowners can weigh in on important
business issues--including conflicts of interest and emerging political,
social, and regulatory issues facing the company. Yet mutual fund investors
are kept in the dark, with no information about how their fund is voting
proxies on important issues like executive pay, options packages, auditor
ratification, the election of directors, independent committees, and social
and environmental policies.
Mutual funds and advisers have
enormous potential to shape corporate governance and social policies at
portfolio companies. Yet since the 1970s, fund participants and regulators
have noted a tendency among mutual funds and advisers to automatically vote
with management, wondering whether this tendency was influenced in part
by a desire to win profitable 401(k) and other business from companies where
proxies are being cast. It is time this potential conflict of interest was
eliminated.
Greater disclosure of proxy-voting
policies and practices would pressure fund managers and advisers to refrain
from unilateral rubberstamping of management's decisions, and would provide
investors additional tools to distinguish among funds in the market. Indeed,
the proposed rules would not only help investors identify those funds and
advisers that carefully examine proxy proposals before voting on them, but
also those who emphasize strong corporate governance or high standards of
corporate social responsibility. The amendments would also allow for fund
owners to be alerted when fund managers vote counter to their best interests,
and in essence, would pressure mutual funds and investment advisers to take
seriously their voting duties.
Some mutual funds argue that
to post votes and policies would be expensive and complicated. But there
are already a number of mutual funds and institutional investors doing this,
and they track their votes and post them publicly on their web sites, in
order to keep costs down. In 1999, Domini Social Investments, manager of
the Domini Social Equity Fund, became the first mutual fund in America to
do this--along with the California Public Employees Retirement System, the
largest public pension fund in the world. Since then, about three dozen
mutual funds, advisers, and other institutional investors have been posting
their votes or articulating detailed voting policies on their web sites,
for the array of resolutions presented at meetings each year.
I urge the SEC to require that
disclosure of proxy votes and voting guidelines be directly disclosed on
mutual fund and investment advisers' web sites, in addition to the SEC's
web site. Furthermore, print copies should be made available to those investors
that do not have access to the web, or for those small companies that meet
the rule criteria, but that do not have an Internet presence.
Additionally, I would like to
see more specific guidance from the SEC on what should be covered in a proxy
voting policy or set of guidelines. Hundreds of resolutions are filed by
shareholders each year, on a range of issues, and voting policies should
reflect the diversity of concerns coming to a vote. In fact, most fund companies-outside
of socially responsible funds-do not address voting policies for the myriad
social and environmental resolutions facing fund managers and advisers.
Engaged proxy voting can help
foster executive accountability and social responsibility on the part of
many companies, and will help convince corporations to be responsive on
a range of issues, including accounting practices, executive compensation,
and environmental, human rights, community, and labor concerns. There is
mounting academic evidence that progress on social, environmental, and corporate
governance issues is linked to positive, long-term corporate performance.
When all mutual funds and investment advisers reveal how they cast proxy
votes, enabling shareholders to know what is being done in their name, we
can expect corporate governance and accountability to substantially improve.
Thank you for the opportunity
to comment on the proposed rules.
Sincerely,
http://www.sec.gov/rules/proposed/s73602/s73602s73802ltra.htm