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Rating:Do Mutual Fund Giants Enable Exec Pay Hikes? Not Rated 5.0 Email Routing List Email & Route  Print Print
Tuesday, July 20, 2010

Do Mutual Fund Giants Enable Exec Pay Hikes?

Reported by Hung Tran

Mutual funds voted in favor of management proposals on changes to executive pay policies at a rate of 84 percent, and ratified executive pay packages at a rate of 77 percent, accroding to a new report. Fundsters interested in mutual fund proxy voting and shareholder activism may want to take a look.

The report found that the mutual fund industry's four greatest "pay enablers," reported as most consistently enabling runaway CEO pay, were Barclays (presumably Barclays Global Investors, now part of BlackRock), Northern (i.e. Northern Trust?), State Street Global Advisors and Vanguard. According to the authors' analysis, Barclays was the most enabling, supporting management compensation proposals 96 percent of the time, while its support for shareholder proposals was under two percent.

"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," stated Gerald W. McEntee, president of the American Federation of State, County and Municipal Employees. "Mutual funds hold over 25 percent of the market capitalization of all U.S. companies, and the ten 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."

Th report also found that Schwab, BNY Mellon, Dreyfus, Fifth Third and Legg Mason were the funds most likely to vote to rein in pay. These "Pay Constrainers" voted for shareholder proposals designed to tie executive compensation to long-term performance at an average rate of 91 percent. These funds also voted against members of board compensation committees at companies with pay problems at a higher rate than other funds.

Overall, the report noted that the average level of mutual fund support for management proposals on compensation issues was 84 percent, unchanged from 2008. The average level of support for the categories of compensation-related shareholder proposals was 56 percent, a significant increase from the 40 percent in 2008. Mutual funds were less willing to vote against directors over compensation issues, increasing the average level of support for certain directors from 48 percent in 2008 to 50 percent in 2009. Mutual funds supported management-sponsored Say on Pay proposals at a rate of 77 percent. 

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