BGI, Northern Trust, State Street and Vanguard were identified as the most supportive mutual fund managers in their proxy voting of management compensation proposals, according to an analysis of 2009 proxy voting patterns commissioned by the American Federation of State, County and Municipal Employees and prepared by The Corporate Library and Shareowners.org.
BGI, which was acquired by BlackRock last year, supported management compensation proposals 96% of the time, while its support for shareholder proposals was less than 2%, a statement about the study said.
Charles Schwab, BNY Mellon, Dreyfus, Fifth Third and Legg Mason were identified as the mutual fund families most likely to vote to rein in pay, the study said.
The 53-page report, “Compensation Complicity: Mutual Fund Proxy Voting and the Overpaid American CEO,” found that mutual funds in the study voted at an average 84% rate for management proposals to change executive pay policies and ratified executive pay packages, or say-on-pay votes, at a rate of 77%.
The report recommends investors “consider shifting their investments to fund families with more responsible practices and records, provided the fee and performance characteristics of the funds are comparable.”
“Given the bailout and dismal performance of many companies, investors in mutual funds should be outraged that their assets are being used to ratify CEO pay that in too many cases was undeserved and unearned,” Gerald W. McEntee, AFSCME president, said in the statement. “Mutual funds hold over 25% of the market capitalization of all U.S. companies, and the 10 largest fund families manage more than half of all mutual fund assets. These 800-pound gorillas need to start throwing their weight around to demand that CEOs get paid only when they perform.”
“State Street Global Advisors takes its fiduciary obligations to its clients very seriously and is focused on protecting the value of our clients’ holdings,” Marie McGehee, State Street assistant vice president, public relations, said in a statement.
John Woerth, principal-public relations at Vanguard Group, said in a statement: “We are withholding comment until we can conduct a more detailed analysis of the study.”
Brian Beades, BlackRock spokesman, said in a statement, “As an independent asset manager, BlackRock acts solely as a fiduciary for our clients, and we have a rigorous process to ensure we cast proxy votes in what the firm believes is the best long-term economic interests of fund investors.”
Northern Trust officials declined to comment, spokesman Newton T. Sears said.