Fidelity Mutual Fund Owners Press for Voting Disclosure

For Immediate Release
December 2, 2002
Contact: Betsy Leondar-Wright, (617) 423-2148 x13

Status

Filed Dec. 2, 2002

Fidelity Mutual Fund Owners Press for Voting Disclosure

“If you call up your mutual funds and ask how they voted in your name, the vast majority will tell you to mind your own business. Millions of Americans cast their vote for Ken Lay as an Enron director and Arthur Andersen as Enron’s accountant without even knowing it.”

– Scott Klinger, Responsible Wealth

A group of Fidelity mutual fund owners have filed a ground-breaking resolution urging the mutual fund to disclose its proxy votes.

Fidelity shareholders took the highly unusual step of filing a shareholder resolution with a mutual fund, prompted by Fidelity’s strong resistance to releasing its proxy voting record to fund holders.

“Fidelity argues that its fund holders don’t care how the fund discharges its fiduciary responsibilities in proxy voting. We don’t believe this is true. This resolution challenges the validity of Fidelity’s arguments,” said Charles Sandmel, a Fidelity Magellan shareholder and lead filer of the proposal. Fidelity Magellan is the nation’s second largest mutual fund, with $54 billion in assets as of September 30, 2002. Mr. Sandmel, a Boston-based financial planner, is joined by members of Responsible Wealth, which is coordinating this campaign.

In a unanimous vote last month, the Securities and Exchange Commission (SEC) proposed a policy that would require mutual funds to disclose their proxy voting policies and voting records to shareholders. The proposed rule, S7-36-02, is open for public comment through December 6, 2002.

Fidelity has been the target of a high-profile media campaign by the AFL-CIO demanding that Fidelity disclose its proxy voting record. The union expressed concern that though Fidelity was the largest holder of Enron and WorldCom stock, it was impossible for Fidelity shareholders to find out whether their shares voted for the now discredited directors and auditors. On Wednesday, December 4, the AFL-CIO will picket Fidelity’s Boston headquarters.

In a modest concession to union pressure, Fidelity released a statement outlining its voting policies on a small number of proxy voting issues, though it has continued to oppose reporting of any particular proxy votes.

The Investment Company Institute, the trade association of the mutual fund industry, and Fidelity Investments have opposed public disclosure of proxy votes.

Nearly 50% of America’s households have investments in mutual funds. The 8,000 mutual funds in the U.S. have nearly $7 trillion in assets, giving them a potentially pivotal role in corporate governance reforms. Unfortunately, the mutual fund industry has developed a reputation for routinely supporting management’s position in matters of corporate governance. These resolutions would provide greater transparency and accountability for fund managers.

The resolution calls for Fidelity to adopt and disclose comprehensive proxy voting policies and to report on all proxy votes undertaken within 90 days of the date the vote is cast. It has been submitted by Magellan shareholders for a vote at the next shareholder meeting, the date of which has not yet been determined.

Shareholder resolutions to companies are relatively common, but are exceedingly rare for mutual funds. The lead sponsors expect dozens of other investors will co-file this resolution in coming months, sending an even stronger message to Fidelity’s management and the Fund’s Board of Trustees. “It is time that Fidelity recognize that the scandals of the times require transparency and a conscientious use of their proxy power, rather than the traditional blind support of management,” said Mr. Sandmel.

Responsible Wealth, a project of United for a Fair Economy, is a growing network of 750 businesspeople, investors and affluent Americans in the top 5 percent of income and wealth who work to promote widely shared prosperity. The Fidelity resolution is one of more than 50 shareholder proposals filed by Responsible Wealth members over the last five years. Resolutions have been filed this year with General Electric, Raytheon, Citigroup, Pfizer and several other large public companies. All shareholder resolutions filed by RW members are available on the web here.

The SEC’s proposed Rule S7-36-02 on mutual fund proxy voting disclosure can be read online at www.sec.gov/rules/proposed.shtml. To date, more than 1,000 comments have been received and posted by the SEC on its website. Public comments on the rule can be sent to rule-comments@sec.gov and should reference the rule number in the subject line of the email.

A copy of the resolution filed with Fidelity Magellan is available here.

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