Vote Disclosure Coming at Pension Funds

At a hearing on compensation in the financial services industry, House Financial Services Committee Chairman Barney Frank said, “If you are the owner of shares … you have a privacy right, but if you own shares on behalf of a fiduciary you will need to disclose how you vote.” In late 2003, after years of pushing from people like Bob Monks and Nell Minow, approved rules requiring mutual-fund managers to disclose how they voted their proxies once a year every August.

A MarketWatch article (Frank: We’re going to have big investors disclose votes, 1/22/10) quotes Beth Young of the Corporate Library, “”By requiring public disclosure of votes, investment managers will think more about whether they have the information and staff to act as a fiduciary for the people they are voting on behalf.” Public disclosure increases feedback between corporations and investment managers as both consider votes more carefully.

The Employee Retirement Income Security Act (ERISA), has long required pension-fund administrators to disclose to pension-fund investors how they are voting on their behalf. However, that information does not need to be disclosed publicly. Additionally, to my knowledge, no fund administrator has ever been disciplined for failing to vote in the interests of plan beneficiaries. See my 1995 correspondence with the Pension and Welfare Benefits Administration and commentary under Fiduciary Responsibilities for Proxy Voting.

The MarketWatch article goes on to quote Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, on the positive impace on mutual fund voting. “The public-disclosure requirement has had a positive impact on how they operated and voted their slates. The information about mutual-fund votes does push the funds to be more active than they were.”

Apparently, no bill is in the drafting stage but such a provision may be included in future legislation later this year. This would be another very positive step that would help shareowners, in this case pension members, hold fund managers and ultimately corporate managers accountable. You can’t hold your pension fund trustees accountable if you don’t know how they vote. Examination can lead to change.

We saw that to be the case earlier this week at State Street Global Advisors (SSgA) after pressure from Walden Asset Management and United for a Fair Economy. Prior to their scrutiny, SSgA voted automatically Against ALL shareholder resolutions on environmental and social issues, whether the issue affected shareholder value or not. SSgA will now abstain if the resolution’s economic impact case is not clear, but will vote FOR resolutions where a strong case regarding how this affects shareholder value is made. (Major Shift in Proxy Voting Policy at State Street,, 1/20/10)

We can expect similar shifts at pension funds, once Frank’s future measure is enacted. Of course, several public pension funds already not only disclose their votes once a year, but also do so in advance. You can see how leaders like the AFSCME Employees Pension Plan, CalPERS, CalSTRS, and Florida SBA are voting by going to I find that information very valuable when I’m voting my own shares as a retail investor. As a member of CalPERS, I also monitor how they are voting to ensure it is in the best interest of plan beneficiaries, like myself. When it isn’t, you can be sure CalPERS hears from me. Fortunately, those disagreements are infrequent.

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