Tuesday, February 23, 2010

Pension funds fail to direct proxy votes: SHARE

Proxy voting is a key component of shareholder advocacy and an important responsible investing strategy. Every year, the Shareholder Association for Research and Education (SHARE) surveys the proxy voting practices of the country’s investment managers. The results of the ninth annual survey are generally positive and slightly better than last year, SHARE says, with one notable exception.

The study indicates that 71% of investment managers vote most of their pension fund clients’ proxies at their own discretion, without instructions or guidance. That’s up from 63% last year and reverses a downward trend in place since 2004.

“This suggests that more institutional investors, including pension funds, let their money manager decide how their proxies should be voted,” says Laura O’Neill, SHARE’s director of law and policy. “The lack of direction is cause for concern.”

“Pension funds, and other institutional investors, should give their proxy voting agents guidance on how their proxies should be voted, ideally by adopting a set of proxy-voting guidelines,” O’Neill adds. “This is important because pension fund trustees have a fiduciary duty to oversee how the proxies attached to their funds’ stocks are voted.”

On the positive side, the survey found that 40% of firms disclose their proxy voting guidelines to the public (an increase of 11% over 2008) and 49% consult with their clients about proxy voting guidelines (up from 39% in 2008). In addition, votes cast by participating firms were more likely to match SHARE’s votes than in 2008.

Thirty-five firms responded to the survey, a response rate of 56%, also an increase from previous years. SHARE says that indicates “greater fund manager willingness to be transparent and accountable about the exercise of proxy voting rights on behalf of clients.”

Download the full survey.

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