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Wednesday, July 31, 2002

AFL-CIO Rally at Fido

by: Tony Pennino

The various controversies surrounding corporate governance and accounting scandals just got kicked up a notch as the AFL-CIO plans a rally today at Fidelity's headquarters in Boston. The union organization is protesting what it terms the firm's refusal to tell shareholders how it votes in certain key corporate governance fights.

The rally is a part of the AFL-CIO's three-day campaign calling for more corporate reforms, a spokesperson with the union organization told the MutualFundwire.com. On Monday, the AFL-CIO held a rally at Stanley Works in New Britain, Connecticut; the company allegedely is moving its corporate headquarters to Bermuda . On Tuesday, it held a rally in Wall Street which included former employees of Enron, WorldCom, and Arthur Andersen.

Wednesday's rally will be led by Richard Trumka, secretary-treasurer of the AFL-CIO. Also speaking at the rally is Tom Birmingham, president of the Massachusetts Senate. Some of Trumka's remarks are as follows, "And where is Fidelity on this battlefield? Fidelity is the largest mutual fund company in the country. They have control of over $1.5 trillion in assets. They are supposed to make investment decisions with the utmost prudence and diligence."

"Instead, they have bought into the sales pitches of investment bankers and CEO's. Fidelity has become a secret agent of CEO greed and excess. I say secret agent because they won't tell us how they vote their proxies, and they issue press releases saying they are the investor's friend," Trumka continued.

"But let me tell you we can count the votes and we can tell how they are voting and they are using our money to prop up the worst behavior in corporate America - to re-elect Enron directors, and to support CEO's like Stanley Works John Trani who wants to run away from America and move Stanley Works to Bermuda," the union orgranizer argued.

"We want to continue the momentum for changes in our corporate law. The legislation concerning accounting was an important first step. But we need more in terms of corporate governance. There needs to be more reform for 401(k) and pension plans. Workers need to know as much as they can about capital markets and companies," the union spokesperson contended.

"Fidelity has the opportunity to be a leader in these reforms. At many companies, Fidelity is the number one shareholder. We have asked Fidelity how they vote on certain issues, but they only have provided guidelines. They won't share information," she continued.

"We feel that this is an issue where mutual fund firms can really make a difference. We also want the SEC to push for more corporate governance reform as well," the official stated. Citizens Funds has called for greater disclosure from the companies in which it holds stock.

AFL-CIO is considering but has not yet decided on whether or not it will have rallies at other firms in the financial services sector.

"We have on overriding fiduciary duty," a spokesperson with Fidelity told the MutualFundWire.com, "to further the interests of our shareholders and to maximize the value of their investments with us. To full fill that obligation, we buy and hold securities that we think will appreciate in value, and we sell securities that we think won't appreciate in value."

The spokesperson also noted that Fidelity is involved with 5,000 proxy votes a year. "Our core philosphy is that we feel that management is responsible to the board and that the board is responsible to the shareholders," he continued.

The official added that Fidelity would not disclose how it cast its votes. "We feel that our vote is shown every time we buy, hold, or sell an equity. The proxy vote is a formal process once a year. We believe our policy is in the best interests of the shareholders," he contended. The spokesperson did conclude that Fidelity executives would listen to the AFL-CIO's concerns. 

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