In a recent paper, Delaware Supreme Court Chief Justice Leo E. Strine Jr. excoriates the Big 4 mutual fund families for voting against shareholder proposals seeking transparency for political contributions. His recommended action is radical. I offer a more moderate strategy. Continue Reading →
Tag Archives | Fidelity
Support for corporate political disclosure sponsored by the Center for Political Accountability’s resolution jumped among the largest mutual funds in 2018. An analysis by Fund Votes found support moved to 53%, up from 45% in 2017. This 8% increase was the largest since CPA began tracking institutional investor votes on its resolution in 2008. Continue Reading →
NAM Board Targeted
Investors led by Walden Asset Management, New York Common and the California State Teachers’ Retirement System (CalSTRS) called on 45 companies sitting on the Executive Committee and Board of the National Association of Manufacturers (NAM) to end the trade association’s attacks on shareholders.
The investors’ letter asks the companies to distance themselves from NAM’s recent attempts to discredit shareholder engagement, particularly on climate change. These efforts have been undertaken primarily through NAM’s membership in the Main Street Investors Coalition (MSIC) and through a report NAM funded and distributed that wrongly asserts that shareholder resolutions diminish company value. MSIC represents no investors. In my opinion, it is a front group for corporate managers attempting to generate fake news, stirring public opinion against investor rights.
Quotables on NAM
“The irony is that many companies on the NAM board are active business leaders on climate change,” said Timothy Smith, Director of ESG Shareowner Engagement at Walden Asset Management.
They understand the very real risk to our environment and have active forward-looking policies and programs on climate. Yet their dues to NAM are funding an aggressive attack against the very investors they meet with regularly to address climate change. We are appealing to these companies to clearly state their opposition to these positions taken by NAM and Main Street Investors Coalition. It is important to do so to protect their company reputations and integrity.
“Environmental risk consideration is part of the evolution of investing. Whether a retail or institutional investor, assessing the risks of investments is a standard practice,” said CalSTRS Portfolio Manager in Corporate Governance Aeisha Mastagni.
NAM appears out of touch with its own constituents. Over the last decade more than 75 percent of the environmental-related proposals CalSTRS filed were withdrawn because the companies were willing to negotiate a mutually agreeable outcome.
The Letter’s Key Paragraph
The MSIC perpetuates the myth that incorporating environmental, social and governance (“ESG”) factors inherently conflicts with protecting and advancing shareholder value. However, the 1,200 members of the United Nations-backed Principles for Responsible Investment – including Fidelity, BlackRock, Vanguard and State Street – with over $70 trillion in assets under management, have committed to consider ESG issues in the investment decision-making process since these factors may affect shareholder value. There is ample evidence that incorporating ESG issues into investment decisions is part of responsible management as a fiduciary. Moreover, hundreds of global companies demonstrate leadership and transparency on sustainability issues. These companies’ action are not guided by “political and social interests” but by what is good for their investors and stakeholders over the long term.
NAM is a trade organization that represents and advocates for manufacturers across industrial sectors. Many NAM members are taking active steps on climate issues as a result of shareholder engagement. Nevertheless, NAM has established significant ties to MSIC, which purports to speak for investors, but which instead appears to be engaged in an attempt to undermine shareholders’ rights by denouncing ESG-related shareholder proposals and by suggesting shareholders’ concerns are politically motivated.
Why NAM is Attacking Shareholders Now
The investor letter noted that, “The emergence of MSIC and the release of this report come at a time when investor support for shareholder proposals is growing” because the “business case behind them is clear and convincing.” The signatories requested that the companies explain their views on MSIC’s public attempts to discredit investor engagement and shareholder proposals.
Over 80 institutional investors, including state and city pension funds, investor trade associations, investment firms and mutual funds, foundations and religious investors added their organization’s names in support of the letter.
Investors are actively engaging companies in their portfolios as concerns over climate risk grow. Most recently, investors representing approximately $30 trillion urged some 150 companies to reduce their greenhouse gas emissions, disclose their assessment of climate risks, and explain what actions they plan in response to climate risk.
Investors like BlackRock, Vanguard and State Street have made it clear that they want the companies in which they own shares to address climate risk.
“It is extremely bad timing for NAM and by implication the members of its board to be attacking investors addressing climate change at a moment when we desperately need to work together,” said Smith.
Since I am older than most of my readers, I offer the following historical perspective. The investor letter sent to the Executive Committee and Board NAM is correct in assuming that shareholder rights are under attack because their proposals are winning. The current fight on climate change and social issues reminds me of an older one on proxy access. In 1977 the SEC held a number of hearings to address corporate scandals. At that time, the Business Roundtable (BRT) recommended amendments to Rule 14a-8 that would allow access proposals, noting such amendments
… would do no more than allow the establishment of machinery to enable shareholders to exercise rights acknowledged to exist under state law.
The right to pursue proxy access at any given company was uncontroversial. In 1980 Unicare Services included a proposal to allow any three shareowners to nominate and place candidates on the proxy. Shareowners at Mobil proposed a “reasonable number,” while those at Union Oil proposed a threshold of “500 or more shareholders” to place nominees on corporate proxies.
One company argued that placing a minimum threshold on access would discriminate “in favor of large stockholders and to the detriment of small stockholders,” violating equal treatment principles. CalPERS participated in the movement, submitting a proposal in 1988 but withdrawing it when Texaco agreed to include their nominee.
Early attempts to win proxy access through shareowner resolutions met with the same fate as most resolutions in those days – they failed. But the tides of change turned. A 1987 proposal by Lewis Gilbert to allow shareowners to ratify the choice of auditors won a majority vote at Chock Full of O’Nuts Corporation and in 1988 Richard Foley’s proposal to redeem a poison pill won a majority vote at the Santa Fe Southern Pacific Corporation.
In 1990, without public discussion or a rule change, the SEC began issuing a series of no-action letters on proxy access proposals. The SEC’s about-face was prompted by fear that “private ordering,” through shareowner proposals was about to begin in earnest. It took more than 20 years of struggle to win back the right to file proxy access proposals.
Let’s hope the current attack on shareholder rights by NAM and the fake Main Street Investors Coalition does not set investor rights back by another 20 years.
Tesla Proxy Access, item #4
Tesla shareholders meet Tuesday, June 5, 2018, at 2:30 p.m. Pacific Time, at the Computer History Museum located at 1401 N. Shoreline Blvd., Mountain View, CA 94043. In the interest of more accurate press coverage of Tesla Proxy Access, item #4, I (James McRitchie) am posting the text of my draft presentation on Tesla Proxy Access in advance. Continue Reading →
Vanguard, Northern Trust, BlackRock and Fidelity scored the lowest among researched funds in supporting AFL-CIO endorsed proxy issues in 2012, according to their 2012 Key Votes Survey. Calvert, Amalgamated Bank, McMorgan and Bridgeway scored the highest.
On proxy-voting issues at 32 companies the AFL-CIO considers representative of a “worker-owner view of value that emphasizes management accountability and good corporate governance,” Vanguard voted against all 32 proposals; Northern Trust, 28 out of 29; BlackRock, 30 out of 32; and Fidelity, 28 out of 30. Continue Reading →
I’ve decided to consolidate my accounts to TDAmeritrade, although I haven’t completed the process so please let me know if you think I’m making a mistake. I am an investor, not a trader, so the trading fees don’t matter much to me. My biggest concern is getting broker letters. However, only four firms were evaluated, so others may be better. Continue Reading →
Four Fidelity funds recently backed an environmentalist proxy proposal for the first time on record, Ceres research found.
Even though the votes cast by Fidelity funds at MGM Mirage Fidelity’s usual abstentions on shareholder environmental proposals, it is a start. Reuthers (Fidelity records first ‘green’ proxy votes, 10/9/10) goes on to note:
Ceres found that like Fidelity, Pioneer Investments shifted to favor environmental resolutions for the first time this year, and that companies like T Rowe Price Group increased their support for such proposals. But a few managers including BlackRock Inc reduced support for climate-change resolutions this year, Ceres found.
Further movement by the likes of Fidelity could result in real transformation. Imagine if they begin to take a long term approach that says there’s little point in earning a bit more during the next quarter if doing so would contribute significantly to an inhabitable planet. Combine that with the idea that we will eventually be getting proxy access not only to the corporate proxy but to the mutual fund proxy.
Jennifer Taub of UMass Amherst recently wrote Access to the Mutual Fund Proxy, noting the mutual funds hold 24% of US corporate equity. Although access to mutual fund proxies has also been postponed, pending outcome of the lawsuit, eventually we can expect to get there. When we do, Taub notes:
Adding some competition to the board nomination process may increase board dependency upon fund shareholders. This may create more bargaining power in board negotiations with fund advisers over fees, expenses and other related matters. Given that boards are loathe to use the “nuclear option” and fire the fund adviser, gaining extra leverage to negotiate more strongly on behalf of fund investors is essential.
Mutual funds that are actually beholden to their shareowners. Isn’t that what the whole mutual concept was intended to accomplish?