News and Archives

Ethical Funds issues new voting policies aimed at combating corporate scandals

The Ethical Funds Company has released its 2004 Proxy Voting Guidelines, which include new measures to address corporate governance issues and help restore investor confidence. At the same time, it also reaffirmed its call for new rules that would require mutual funds to disclose their voting practices and policies.

"It's time that Canadian mutual funds were clear with investors about how they use proxy voting power to influence corporate direction," says Don Rolfe, CEO of The Ethical Funds Company. "We release our proxy voting guidelines because investors have the right to know how their money is being used to encourage good corporate governance and corporate social responsibility."

Proxy voting allows investors to influence companies by electing directors to the board and voting on major proposals impacting corporate governance practices, business ethics, and strategic direction.

The United States Securities Exchange Commission (SEC) now requires mutual funds in the US to disclose proxy voting policies and procedures. This allows investors to evaluate the commitment of their mutual fund to good corporate governance. Although there is no such regulation in Canada, unit holders in this country would benefit if mutual funds would voluntarily disclose how they are voting at company annual general meetings. The Social Investment Organization is calling on the Ontario Securities Commission to implement similar rules in Canada.

"Sunlight is the best disinfectant," said David Beatty, Managing Director of the Canadian Coalition for Good Governance and Professor at Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management, University of Toronto. "By disclosing proxy voting guidelines the public can be sure that mutual funds are voting proxies in a manner that serves investors, the corporation, and market integrity. The Ethical Funds Company should be commended for taking a leadership role in this regard."

Highlights from The Ethical Funds Company 2004 Proxy Voting Guidelines include:

Support for proposals to make Audit, Compensation, and Nominating Committees function independently of Management;

Support for proposals to allow shareholders to nominate directors rather than forcing shareholders to vote only for or against company nominees;

Clear guidelines for voting against company nominees when the Board has not responded to shareholder proposals approved by a majority vote;

Support for proposals requiring companies to disclose and fully explain executive compensation to shareholders;

Support for establishing a Code of Business Ethics and Business Conduct as well as notification to shareholders if the Board decides to waive the Code under any circumstance;

Support for proposals to reduce corruption in developing countries by requiring oil and gas and mining companies to disclose how revenue flows impact local communities;

Support for proposals calling for companies to disclose contributions made to political parties and the rationale for making each contribution;

Support for proposals calling upon banks to avoid reputational damage by adopting World Bank environmental guidelines when evaluating resource extraction projects.

The Ethical Funds Company's 2004 Proxy Voting Guidelines, Fifth Edition, are available on the company Web site at: www.ethicalfunds.com.

Back to news and archives