Fund Forward
May 24, 2010
Test of the Massey Mine
Fund giant boards of directors at AllianceBernstein, American Funds, Fidelity, Vanguard and others are reportedly starting to bring about meaningful change in the corporations in which they are invested. Proof should come any day now, when the shareholder proxy votes from the annual meetings are released.
Fund chief executive officers spoke about the power and influence their proxies wield in an interesting Reuters article last week, "Mutual Funds Seek to Shed 'Rubber Stamp' Tag."
That's a far cry from the "lap dogs" that Arthur Levitt called fund directors in a sit-down interview we had with him not long after he stepped down as chairman of the Securities and Exchange Commission (see "Arthur Levitt 'Takes on the Street,'" MME 9/23/02).
Fund CEOs say their boards are now actively overseeing companies' operations, instead of simply selling shares when dissatisfied, a heretofore best-case scenario, or worse-case scenario, blindly voting with management.
Issues of concern extend beyond boosting profits to executive pay, being socially responsible-and most notably, worker safety.
Take the April 5 explosion that killed 29 workers at the Massey Energy Co. mine in Comfort, W.Va. One of the Massey directors, Lady Barbara Thomas Judge, who sat on the board's safety committee, stepped down two weeks after the accident. Fidelity and Legg Mason had voted against Judge, who had been widely criticized for sitting on too many boards. Her resignation letter, citing "other ongoing business activities," admitted as much.
Pension fund activist Michael Garland, director, CtW Investment Group, reports he has been having productive discussions with a number of fund giants, which he declined to name, to convince them to remove three additional Massey directors.
It is reassuring that a sense of responsibility, ethics and ownership is becoming more critical for all directors, not just independents.
(c) Copyright 2010 Money Management Executive and SourceMedia Inc. All rights reserved.
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