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Tell Fidelity to Disclose its Shareholder Votes
As a top shareholder of companies such as Enron, WorldCom, and other alleged corporate wrongdoers, Fidelity is responsible in part for these companies' corporate governance--including decisions about executive compensation and conflicts of interest in corporate accounting oversight. Tell SEC Chairman Harvey Pitt to make Fidelity disclose shareholder votes. Send your fax now!
| Sample Letter for Campaign |
Subject: Make Fidelity Disclose Shareholder Votes
Dear [ Decision Maker ] ,
As a mutual fund investor, I am writing to express my dismay that Fidelity Investments does not disclose its individual proxy votes at portfolio companies. I urge you to promptly adopt rules to require Fidelity and other mutual fund companies to disclose their individual proxy voting decisions.
As the world's largest mutual fund company and one of the most influential investors in the global capital markets, Fidelity has enormous power to shape corporate governance. Unfortunately, as the largest provider of corporate 401(k) plans, Fidelity also has a self-interest in voting with management to avoid disrupting its business relationships. By keeping its proxy voting confidential, Fidelity prevents mutual fund investors from monitoring this potential conflict of interest.
Although Fidelity refuses to disclose its proxy votes, it appears that the mutual fund giant voted:
+ to re-elect an Enron director to the Lockheed Martin board at that company's April 2002 shareholder meeting;
+ against a recent shareholder proposal to bar auditors from performing consulting work at Halliburton, a company that is now under investigation by your Commission for improperly recording revenues; and
+ in favor of management proposals at Nabors Industries, Tyco International and Ingersoll Rand to reincorporate in Bermuda, moves that significantly reduced shareholder rights.
I would never have voted in this manner myself and, as a mutual fund investor, think it is unconscionable that Fidelity might have voted this way on my behalf. The only thing I find more unconscionable is that Fidelity will not reveal its actual proxy voting decisions.
I understand that the Securities and Exchange Commission proposed rule amendments in 2000 that, among other things, would require investment advisers to disclose whether or not clients can obtain information on how they voted their proxies on a given issue. This is inadequate because it does not require disclosure of the individual voting decisions.
As you yourself have stated, an investment advisor has a fiduciary duty to vote the shares of its clients in a manner that is consistent with the best interests of its clients. Disclosure of individual proxy voting decisions is the only way that I can insure that my mutual fund company is fulfilling its fiduciary duty to me. Requiring disclosure of individual proxy voting decisions by mutual funds will also promote accountability and transparency, two qualities sorely needed to restore investor confidence in our capital markets.
Sincerely,
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Campaign Launched:
July 31, 2002
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As a top shareholder of companies such as Enron, WorldCom, and other alleged corporate wrongdoers, Fidelity is responsible in part for these companies' corporate governance. It appears that Fidelity used its clients' share voting power to support entrenched boards of directors, overpaid corporate executives and conflicted audit committees at these troubled companies. However, as long as Fidelity does not disclose its stock holding votes, its clients cannot monitor its voting decisions.
Once a year, every public corporation holds a meeting for shareholders at which the critical decisions shaping each company's governance are made--decisions such as who will serve on the Board of Directors, how the CEO will be paid, and what general policies the shareholders will recommend to the company's board. Shareholders vote at these meetings on ballots--otherwise known as proxies--that are provided to them by the company.
Investment advisors have a fiduciary duty to vote the shares of their clients in a manner that is consistent with the best interests of their clients. Under the Employee Retirement Income Security Act, the voting rights attached to company stock are considered to be "plan assets" that must be managed in the best interests of pension plan beneficiaries.
Mutual fund companies, who manage money for individual investors and for 401(k) plan participants, have an obligation to vote in the interests of their mutual fund investors. Unfortunately, the interests of a mutual fund company and the interests of mutual fund investors may differ when it comes to proxy voting.
As the largest provider of corporate 401(k) plans, Fidelity has a self-interest in voting with management to avoid disrupting its business relationships. This conflict of interest does not end with Fidelity's corporate clients, as Fidelity's business interests discourage voting against the management of potential clients Fidelity hopes to win in the future.
Fidelity's own policies prevent mutual fund investors from monitoring this potential conflict of interest. According to Ed Corrao of Fidelity's legal department, "Fidelity Investments as a matter of policy does not disclose its vote decision with respect to a particular company, meeting or agenda item."
As a top shareholder of companies such as Enron, WorldCom, and other alleged corporate wrongdoers, Fidelity helps shape these companies' corporate governance. At many of these companies, Fidelity had an opportunity to vote for shareholder proposals asking for corporate governance reform.
According to Eric Roiter, Fidelity's Senior Vice President and General Counsel, "the Fidelity funds' guidelines generally call for the funds to vote in support of management's proposals." Automatic support for management positions by institutional investors such as Fidelity may facilitate wrongdoing by corporate directors and executives.
Call on the Securities and Exchange Commission to require mutual fund companies to disclose their proxy voting decisions. Click here to send a letter to SEC Chairman Harvey Pitt and Fidelity Investments CEO Edward C. Johnson, III.
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