UPDATE: Union Asks Mutual
Funds To Explain Director Voting
DOW JONES NEWSWIRES
April 2, 2007 4:58 p.m.
(Updated in the fifth paragraph to include information
for two fund firms.)
By Kaja Whitehouse
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A union shareholder has placed
Fidelity Investments and a number of other mutual fund firms under the
spotlight for decisions to re-elect directors targeted for controversial
pay packages last year.
Officials from 14 mutual funds, including Northern
Trust Corp. (NTRS) and Deutsche Bank AG (DB), received letters Monday
asking them to explain how votes cast in favor of certain directors "was
in the best interest of investor clients."
The effort highlights the pressure being placed on
mutual funds and other large investors to cast their votes in ways that
might impact pay for top executives. In this case, the union group is
pushing for funds to support more "withhold" vote campaigns on pay this
year.
"This upcoming proxy seasons presents a key test of
your commitment," said the letter mailed to Fidelity Chairman Edward C.
Johnson on March 30th.
Fund firms either declined to comment or couldn't be
immediately reached for comment. State Street Corp. (STT), Northern
Trust and Deutsche Bank have yet to receive the letter, company
officials said.
The letter-writing campaign was launched by CtW
Investment Group, the investment arm of labor federation Change to Win,
which sponsors $180 billion in pension assets through affiliate unions.
Prior to writing the letters, CtW assessed votes for 17
directors at four companies targeted with withhold-vote campaigns last
year: Home Depot Inc. (HD), Clear Channel Communications Inc. (CCU),
UnitedHealth Group Inc. (UNH) and Exxon Mobil Corp. (XOM). At Home
Depot, for example, some directors received withhold votes of as much as
36% due to shareholders' ire over payments made to Chief Executive
Robert Nardelli, such as guaranteed bonuses and the forgiveness of a $10
million loan.
CtW then looked at how 20 top mutual fund investors
voted for these directors in corporate elections. Two mutual funds,
Barclays PLC (BCS) and GMO LLC., were praised for withholding votes for
all 17 directors. Four other firms, including JPMorgan Chase & Co. (JPM),
were told they're on the right track, but could use some improvements.
Fidelity and four other mutual funds - including
Northern Trust, Deutsche Bank and units of General Electric Co. (GE) and
American Funds Inc. - were criticized for supporting all 17 directors.
State Street withheld votes for one director at Home Depot, and Legg
Mason Inc.'s (LM) ClearBridge group supported all the directors, except
for those at Clear Channel where it wasn't an investor, the union said.
"What we wanted to know is, which firms are
responsible" for re-electing these directors, said Michael Garland,
director of value strategies at CtW Investment Group. "If you look at
last season you get very high withholds, but we're still not getting
majority votes," he said.
-By Kaja Whitehouse, Dow Jones Newswire; 201-938-2243;
kaja.whitehouse@dowjones.com
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