Study: Mutual fund proxy votes back management

Mutual funds voted in favor of management proposals more than 90% of the time in 2007, a study by the Investment Company Institute in Washington found. The study, released today at a conference in Washington on mutual fund proxy voting sponsored by Washington think-tank American Enterprise Institute for Public Policy Research, showed that 83% of the proxy votes were cast in uncontested elections of corporate directors and ratification of audit firms. Those votes are closely aligned with recommendations from two proxy advisory firms: ISS Governance Services Inc. of Rockville, Md., a unit of RiskMetrics Group Inc. in New York, and Glass-Lewis & Co. of San Francisco. "Proxy Voting by Registered Investment Companies: Promoting the Interests of Fund Shareholders," is the largest known examination of proxy votes cast by funds, scrutinizing more than 3.5 million proxy votes by 160 of the largest fund companies during the 12 months ended June 30, 2007, according to ICI. Funds follow policies designed to avoid conflicts of interest and to advance the interests of shareholders when casting their proxy votes, the study concluded. In 2007, the majority of funds withheld votes from one or more director nominees at more than 10% of the companies they owned, and funds were likely to favor proposals that promote shareholder rights and weaken corporate takeover defenses. Funds voted for almost 40% of shareholder proposals, while company boards supported less than 1% of the proposals, according to the findings. “The majority of funds vote in a way that they believe will maximize the fund’s financial returns,” ICI president and chief executive Paul Schott Stevens said in a statement. “This is in keeping with the social contract between a fund and its investors,” he said.