May 3, 2017
Mutual Fund Companies Have Significant Power to Increase Corporate Transparency, Public Citizen Report Shows
64 Percent of Political Spending Disclosure Shareholder Proposals Would Have Received Majority Support Had Major Mutual Fund Companies Voted in Favor in 2016
WASHINGTON, D.C. – Sixty-four percent of political spending disclosure shareholder resolutions at companies where mutual fund companies own more than five percent of common stock would have received majority support in 2016 had those mutual funds voted their shares in support of the resolutions, a new Public Citizen report shows.
The report was released during a telephone press conference to call on the nation’s largest mutual fund companies to support political spending disclosure. Participants included U.S. Sen. Robert Menendez (D-N.J.); John Coates, professor of law and economics at Harvard Law School; and Patrick Doherty, director of corporate governance for the Office of the New York State Comptroller.
The report comes as more shareholders push companies to disclose information critical to shareholders’ ability to evaluate their investments. Major mutual fund companies can and should play a pivotal role, Public Citizen and its partners in the Corporate Reform Coalition maintain.
“Corporate insiders shouldn’t be able to use investor money as a piggy bank to advance their personal political agendas without any oversight from shareholders,” said Senator Menendez. “Disclosure of corporate political spending is not only valuable for our democracy but the case for disclosure is also important purely as a matter of corporate governance and investor protection. Plainly said, this information is material to how shareholders decide where to invest and their money and how to vote in corporate elections. We need mutual fund companies to step up and vote in the interest of their investors when disclosure of political spending is up for consideration, and we need an SEC that will truly stand up for investors and corporate governance principles and finally require this disclosure.”
“This report illustrates the significant power major mutual fund companies like Vanguard and BlackRock have in corporate elections,” said Rachel Curley, democracy associate for Public Citizen’s Congress Watch division and report author. “As stewards of Americans’ retirement funds they should be leaders in encouraging companies to be transparent so that they can better understand the market and invest more strategically for their retail investor clients.”
Curley examined major mutual funds like The Vanguard Group Inc., BlackRock Inc., Fidelity Investments and others that own more than five percent of common stock in companies where shareholders filed political spending disclosure resolutions in 2016. Of 25 companies that had political spending disclosure shareholder proposals up for a vote in 2016, 16 proposals would have received majority support had the major mutual fund companies switched their votes and supported the proposals.
“I thank Public Citizen for its work on this report as well as its continued advocacy on the issue of transparency in corporate political spending,” said U.S. Rep. Mike Capuano (D-Mass.). “Shareholders are the owners of publicly traded corporations and yet, management is not required to even disclose the extent to which they use corporate funds on political spending let alone get shareholder permission. In a democratic society that values transparency and property rights, the current state of the law is upside down and I appreciate these efforts to change it.”
Read the full report here.