The U.S. fund industry trade group, the Investment Company Institute, has come out in support a series of regulatory proposals regarding the mutual fund industry’s proxy voting practices. However, it rejects the idea of disclosing votes.
In a letter to the Securities and Exchange Commission commenting on its proxy voting initiative, the ICI endorses proposals requiring mutual funds to:
- adopt proxy voting policies; adopt procedures that guide their proxy voting policies in potential conflict situations;
- disclose their policies and procedures to the SEC and fund shareholders; and
- retain records of proxy voting decisions and related information for SEC examiners.
In addition, the ICI recommended that the SEC adopt a new proposal that would assign special proxy voting oversight responsibilities to a fund’s independent directors.
However, it doesn’t support the proposals without reservations. “We object to two elements of the SEC’s initiative that would harm rather than help mutual fund shareholders,” says ICI president Matthew Fink. “The SEC wants reports filed twice each year detailing hundreds of thousands of individual proxy votes, in some cases accompanied by lengthy explanations. This will be counterproductive for many reasons described in our comment letter to the SEC.”
“First, this part of the SEC’s initiative would needlessly politicize mutual fund portfolio management. The information is being sought mostly by special interest groups. They want proxy votes disclosed to further their social and political agendas, regardless of how much it hurts mutual fund shareholders. Special interest groups appear to view mutual funds as a prize to be captured as they single-mindedly pursue their narrow objectives,” he said.
“Second, this part of the SEC’s initiative will weaken rather than strengthen mutual funds’ ability to promote strong corporate governance,” Fink argues. “It would do so by essentially repealing confidential voting, a fundamental shareholder right. Confidential voting has been championed for more than a decade as a critical way to improve corporate governance and promote accountability, and has been adopted at a significant number of companies. The SEC should strengthen confidential voting by expanding its reach instead of undermining it. This would be a singularly effective way to empower institutional investors and achieve the governance improvements the commission is seeking. We pledge our strong support should the SEC choose to do so.”
http://www.ici.org/ici_info/02_news_sec_proxy.html