Research from Vancouver’s Shareholder Association for Research and Education (SHARE) finds that mutual funds are becoming a bit tougher on corporate management in their proxy voting behaviour.
On Monday, SHARE released its third annual survey of proxy voting by Canadian mutual funds. The report examines four years of data on votes cast by 258 funds managed by 21 fund companies in connection with the shareholder meetings of more than 200 senior Canadian issuers.
“Year after year, and in each subcategory of proposal, we found that an increasing percentage of mutual fund voting power is being exercised to vote against management,” SHARE concludes.
SHARE reports that while this decline in mutual fund support for management’s board nominees continued in 2009, average levels of support continue to be very high. Also, the appointment of auditors continues to win overwhelming approval from almost all mutual fund companies, SHARE says, with the exception being the three socially responsible investment companies covered in the research.
“Mutual funds rejected a significant 20 to 30% of compensation resolutions put forward by management each year,” SHARE also finds, noting that the majority of these rejected proposals sought approval for stock option grants. “These resolutions were relatively unpopular with shareholders generally, although average votes against did not exceed 20% in any of the four years we surveyed,” SHARE adds.
SHARE also looks at voting records on shareholder proposals. “Here we found that mutual funds were less supportive of shareholder proposals than all shareholders in 2006 and 2007, but more supportive of them in 2008 and much more so in 2009. In addition, we found that support for shareholder proposals has grown each year among all shareholders, including mutual funds,” SHARE says.
The three SRI fund families are far less supportive of management than each of the other fund families every year, and in every category of proposal examined, SHARE adds. “The vote reports of these fund companies indicate a strong desire for change on boards, in auditor appointments and on equity-based compensation,” SHARE says.
Conversely, SHARE reports that the 10 largest Canadian retail fund families voted, as a group, a higher percentage of their ballots in favour of management on all the issues it examined than the average of the 21 funds surveyed. “As these funds represent an enormous proportion of the voting power of all funds in which an individual can invest, they deliver a strong signal in favour of current corporate practice,” SHARE concludes.
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Support by Canadian mutual funds for corporate management declining: SHARE
Funds rejected a significant 20-30% of compensation resolutions put forward by management
- By: James Langton
- September 27, 2010 September 27, 2010
- 13:50