A new report suggests that mutual funds continue to exercise their voting rights to maintain the status quo in corporate Canada.

The study, entitled Proxy Voting by Canadian Mutual Funds, examined the 2006 and 2007 proxy voting records of 175 funds from 21 Canadian mutual fund families.  The study, conducted by the Shareholder Association for Research and Education (SHARE) found that large mainstream fund families supported shareholder resolutions 26 per cent, or less, of the time.

By contrast, three exclusively-SRI fund companies, Inhance, Ethical Funds and Meritas, supported shareholder resolutions 74 per cent, 69 per cent and 66 per cent respectively.

In addition, the study found that most mutual funds exercised their proxy votes overwhelmingly in support of director nominees.

"While we were not completely surprised that most mutual fund companies reported casting their ballots heavily in favour of director nominees and corporate auditors, in some cases it raises serious questions about 'auto-pilot' proxy voting", said Laura O'Neill, SHARE's Director of Law and Policy and one of the authors of the study.

"Based on our findings, we believe that more research needs to be done on whether mutual funds are actively considering investors' interests when they vote proxies".

The report, based on publicly disclosed proxy voting decisions by mutual fund companies, was published in association with Fundvotes.com

The findings are similar to a survey released in September 2007 by the Social Investment Organization, which found that investor proposals received only 34 per cent from a broad sample of Canadian mutual funds between July 1, 2005 and June 30, 2006.  The SIO report found that conventional funds, as opposed to SRI funds, voted en masse with management and against investor resolutions the majority of the time.

The SHARE survey also revealed that a small number of fund companies routinely rejected proposals representing widely-accepted good governance standards, including initiatives asking for disclosure on compensation consultants, the work they do and the fees paid to them.

Shareholder proposals on human rights issues generally fared better than proposals on other topics.  As a group, Canadian mutual funds tended to vote in favour of requests that companies establish policies and produce reports aimed at ensuring that their operations incorporate respect for human rights.

To obtain a copy of the report, visit www.share.ca

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