Fidelity funds abstain on some proxy resolutions

Top funds operated by Fidelity Investments stopped voting against shareholder resolutions that urge disclosure of corporate political spending for the 2007 proxy season, according to a study by a group that advocates for transparency in political spending.
NOV 26, 2007
Top funds operated by Fidelity Investments stopped voting against shareholder resolutions that urge disclosure of corporate political spending for the 2007 proxy season, according to a study by a group that advocates for transparency in political spending. Boston-based Fidelity's Contrafund, Growth & Income Fund and Magellan Fund this past proxy season changed their policy of generally voting against shareholder resolutions calling for disclosure of political spending, according to the Center for Political Accountability in Washington. In prior years, Fidelity, the nation's largest mutual fund company, opposed resolutions filed with companies by the CPA that called for such disclosures, according to Bruce Freed, executive director of the CPA. "By moving to abstention, it increases the weight of the vote for the political-disclosure resolution," he said. "It's very important that shareholders and financial analysts be able to track company political spending because of the growing legal and reputational risks that are associated with that spending," Mr. Freed said. "Company money can end up with various groups that take positions that may not be what they say they support." For example, companies that have taken positions supporting diversity could support political candidates that have contrary positions, Mr. Freed said. The CPA, as well as socially conscious mutual funds, public pension funds and religious groups, this year sponsored non-binding resolutions that favor disclosure of political spending at 53 companies. The CPA plans to sponsor similar resolutions at 60 companies next year, Mr. Freed said. The resolutions were approved by shareholders at drug maker Amgen Inc. of Thousand Oaks, Calif., and information technology consulting company Unisys Corp. of Blue Bell, Pa. FMR Corp., the management company for Fidelity, amended its proxy-voting guidelines this year, according to an e-mail from company spokesman Vincent Loporchio. "We decided to take a case-by-case review of shareholder proposals this year and abstain from the vote if we had not developed an internal position or we had not completed an analysis to determine the economic merits of the vote," he wrote. Other funds voted to support the CPA's resolutions calling for disclosure of corporate political spending, the group reported. They included three funds operated by Franklin Templeton Investments Inc. of San Mateo, Calif., two funds operated by Pimco Funds of Newport Beach, Calif., and three funds operated by T. Rowe Price Group Inc. of Baltimore. In addition to Fidelity, funds operated by John Hancock Funds LLC of Boston, OppenheimerFunds Inc. of New York and The Vanguard Group Inc. of Malvern, Pa., ab-stained from voting on the resolution calling for political spending transparency, the CPA said in a release about its study. However, while Mr. Freed applauded the fact that some of the largest mutual funds are refraining from opposing such resolutions, Patrick McGurn, special counsel for proxy-research company ISS Governance Services of Rockville, Md., said that the development is "a blade that cuts in both directions."
The Department of Labor and the Securities and Exchange Commission typically "frown upon" mutual funds' abstaining from votes if shareholder value is at stake, Mr. McGurn said. "If you're abstaining, you're saying you don't see any financial impact coming out of that proposal," he said. While the large mutual fund abstentions may help stimulate voting for the proposal so that the resolutions get more support, "it isn't necessarily a good sign, per se," Mr. McGurn said. "In the long run, it may mean some investors don't see any economic impact coming out of these issues," he said. Votes supporting the political-spending resolutions may hit a plateau, and "you may see more case-by-case voting," Mr. McGurn added. But other proxy-research experts see the issue gaining more force. "This is definitely an issue that is going to become a part of securities analysis," predicted Nell Minow, founder and editor of The Corporate Library, a corporate-governance research firm in Portland, Maine. "A lot of people are looking at this, who they're giving the money to, what issues they're supporting," she said about company spending. "Companies that are putting their money into entrenching positions are not making themselves viable over the long term," Ms. Minow said. "Companies putting money into avenues to help them grow and stay competitive will be viable over the long term." Sara Hansard can be reached at [email protected].

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