Figuring out how your mutual fund manager votes

Funds typically list their voting results on their websites, and they also file documents with the Securities and Exchange Commission detailing their choices.
By STAN CHOE, Associated Press Published: May 11, 2014
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— Do you think a particular CEO makes too much money? Would you like to replace the directors who signed off on that salary? Or to vote on a company’s environmental policy?

If you own stock in a company, you get such opportunities. Every year, companies open the polls at their annual meetings, and shareholders elect directors to the board and vote on various policies. At Bank of America’s meeting on Wednesday, for example, shareholders weighed in on executive compensation and whether to force the bank to tally its impact on greenhouse-gas emissions.

But investors who prefer owning mutual funds to individual stocks don’t get to vote. Instead, the managers of their mutual funds do, carrying the weight of all the investors in the fund.

Roughly half the companies in the Standard & Poor’s 500 index hold their annual meetings in May, so many of those votes are occurring now.

Investors can see how their mutual funds voted on issues over the prior year: Funds typically list their voting results on their websites, and they also file documents with the Securities and Exchange Commission detailing their choices.

Seeking advice

Because fund managers would rather spend time buying and selling stocks than studying proposals for each corporate meeting, many funds hire an advisory firm to help them. Institutional Shareholder Services, better known as ISS, is such a company. It has about 1,700 clients and issues vote recommendations on nearly 39,000 companies around the world.

The votes cast by mutual funds carry big weight. Vanguard, which controls more than $2 trillion in assets, is often a company’s largest shareholder after totaling the investments across all of its funds. Vanguard and other large fund families say they vote based on what will drive the best long-term value for their investments. Vanguard prefers that the majority of directors on a company’s board be independent of management, for example.

For example

Consider UPS, in which Vanguard funds collectively own about 5.1 percent of the outstanding shares, according to FactSet.

Last year, Vanguard’s Total Stock Market Index fund — the largest mutual fund with $323.7 billion in assets — voted for a proposal to make all shares of stock have the same voting rights. The fund’s managers were hoping to replace the current system under which some UPS shares carry greater influence, with 10 votes per share.

The fund voted against the recommendation of UPS management, though the proposal failed to pass. The fund also voted for all 12 of the nominees that management had recommended for its board of directors.