Advocates Prep for Fido Funds’ Genocide Vote
Article published on Feb 28, 2008
By Peter Ortiz
A human rights group is claiming victory because investors in eight Fidelity funds will decide whether or not to adopt anti-genocide investment policies. The vote will take place at a March 19 meeting.
While advocacy group Investors Against Genocide expects the proposals to be defeated, the developments could have wide-ranging implications for the industry as the group plans on urging investors to turn the screws on many more shops.
Fidelity “has become a symbol of investor irresponsibility by refusing to consider even extreme ethical issues when making investment decisions” in regard to its involvement with companies in Sudan, according to a proposal submitted by14 Fidelity fund shareholders coordinated by Investors Against Genocide.
The proposal goes beyond Sudan by calling for procedures to “avoid future investments in companies that contribute to genocide.”
Fidelity objected to the group’s proposal, arguing that it sought to “micro-manage” how each fund’s assets are invested and would interfere with the fund managers’ ability to run the funds successfully, according to a letter it filed with the SEC.
Some say investors that want to mix their beliefs with investments can always choose socially responsible funds. Others note that the activists’ proposals may be a detriment to the health of investors’ financial portfolios.
Several high-profile mutual fund firms — including Fidelity, Vanguard and American Funds, among others — have been targeted by activists protesting the underlying investments of some of their funds. Advocacy groups claim some companies in these funds’ portfolios are contributing to or profiting from genocide in the Darfur region of Sudan.
As part of their awareness campaign, advocacy groups have launched television ads, such as one featuring a couple and their financial advisors who tells them they are "making a killing in Darfur." 1Fund shops have also encountered protesters outside their offices. (See Ignites Oct. 17, 2007, “Fund Employees Encounter Darfur Protestors”)
Pressuring funds to present a proposal on the genocide question to its shareholders is the latest strategy used by activists groups. Eric Cohen, chairman of Investors Against Genocide, says the group is pushing a similar proposal for other Fidelity funds scheduled for shareholder meetings, including five on April 16 and four on May 14.
In addition to Fidelity, the group says shareholders have also sent similar proposals to T. Rowe Price, Franklin Templeton, Vanguard and Barclays.
Fidelity has resisted the push so far. In November, Fidelity asked the SEC for assurance that it wouldn’t recommend enforcement action if it omitted the proposal from its proxy materials at its upcoming fund shareholder meeting. But last month the agency declined to make such a pledge, creating a new way for human rights groups to pressure fund companies.
“In light of the recent decision of the SEC staff, the shareholder resolution will be included in the proxy statement of these funds,” says Fidelity spokesman Vincent Loporchio.
While the issue is up for a vote, the fund shop will ultimately have the final say on divestment, observers note. That’s because companies are not bound by the results, according to the SEC.
Fidelity has also confirmed that the shareholder proposal is non-binding. As of Wednesday Fidelity had not filed a proxy containing the shareholder proposal, but it will shortly, Loporchio says. He did not give a time frame.
Cohen says that his group has been corresponding with Fidelity’s lawyers, who promised as late as Feb. 7 in an e-mail correspondence that the proposal will be filed.
Fidelity declined to detail its planned wording for the proposal and Cohen doesn’t expect to see the word "genocide" in it.
“Long-term we are optimistic, even though in the short term we think Fidelity will win the shareholder vote on the 19th,” Cohen says, noting there is not enough time to inform shareholders about the proposal. “If there’s a delay in the time which it is official, it helps them because they oppose the [proposal] and hurts us because we want there to be as much transparency and publicity as possible about what is going on.”
Activists’ efforts and President Bush’s recent signing into law of the Sudan Accountability and Divestment Act of 2007, which makes it easier for fund firms to divest themselves from Sudan-related stocks by protecting them from lawsuits, hasn’t had much effect so far. Shops have indicated that they will continue working with and pressuring genocide-tainted companies as a way of effecting positive change, according to analysts. Franklin and Vanguard are two such shops.
T. Rowe Price notes the company has taken proactive steps to monitor risk in Sudan and other parts of the world, says spokesman Robert Benjamin. Cohen says a shareholder sent a proposal for two of the company’s funds Oct. 2, but Benjamin says they didn’t receive any such proposal for their funds. The company has no shareholder meeting scheduled for its funds this year, he says.
Unlike annual meetings for publicly traded companies, funds can “go years and years” without holding shareholder meetings where proposals would be presented, Cohen says.
Article published on Feb 28, 2008
By Peter Ortiz
A human rights group is claiming victory because investors in eight Fidelity funds will decide whether or not to adopt anti-genocide investment policies. The vote will take place at a March 19 meeting.
While advocacy group Investors Against Genocide expects the proposals to be defeated, the developments could have wide-ranging implications for the industry as the group plans on urging investors to turn the screws on many more shops.
Fidelity “has become a symbol of investor irresponsibility by refusing to consider even extreme ethical issues when making investment decisions” in regard to its involvement with companies in Sudan, according to a proposal submitted by14 Fidelity fund shareholders coordinated by Investors Against Genocide.
The proposal goes beyond Sudan by calling for procedures to “avoid future investments in companies that contribute to genocide.”
Fidelity objected to the group’s proposal, arguing that it sought to “micro-manage” how each fund’s assets are invested and would interfere with the fund managers’ ability to run the funds successfully, according to a letter it filed with the SEC.
Some say investors that want to mix their beliefs with investments can always choose socially responsible funds. Others note that the activists’ proposals may be a detriment to the health of investors’ financial portfolios.
Several high-profile mutual fund firms — including Fidelity, Vanguard and American Funds, among others — have been targeted by activists protesting the underlying investments of some of their funds. Advocacy groups claim some companies in these funds’ portfolios are contributing to or profiting from genocide in the Darfur region of Sudan.
As part of their awareness campaign, advocacy groups have launched television ads, such as one featuring a couple and their financial advisors who tells them they are "making a killing in Darfur." 1Fund shops have also encountered protesters outside their offices. (See Ignites Oct. 17, 2007, “Fund Employees Encounter Darfur Protestors”)
Pressuring funds to present a proposal on the genocide question to its shareholders is the latest strategy used by activists groups. Eric Cohen, chairman of Investors Against Genocide, says the group is pushing a similar proposal for other Fidelity funds scheduled for shareholder meetings, including five on April 16 and four on May 14.
In addition to Fidelity, the group says shareholders have also sent similar proposals to T. Rowe Price, Franklin Templeton, Vanguard and Barclays.
Fidelity has resisted the push so far. In November, Fidelity asked the SEC for assurance that it wouldn’t recommend enforcement action if it omitted the proposal from its proxy materials at its upcoming fund shareholder meeting. But last month the agency declined to make such a pledge, creating a new way for human rights groups to pressure fund companies.
“In light of the recent decision of the SEC staff, the shareholder resolution will be included in the proxy statement of these funds,” says Fidelity spokesman Vincent Loporchio.
While the issue is up for a vote, the fund shop will ultimately have the final say on divestment, observers note. That’s because companies are not bound by the results, according to the SEC.
Fidelity has also confirmed that the shareholder proposal is non-binding. As of Wednesday Fidelity had not filed a proxy containing the shareholder proposal, but it will shortly, Loporchio says. He did not give a time frame.
Cohen says that his group has been corresponding with Fidelity’s lawyers, who promised as late as Feb. 7 in an e-mail correspondence that the proposal will be filed.
Fidelity declined to detail its planned wording for the proposal and Cohen doesn’t expect to see the word "genocide" in it.
“Long-term we are optimistic, even though in the short term we think Fidelity will win the shareholder vote on the 19th,” Cohen says, noting there is not enough time to inform shareholders about the proposal. “If there’s a delay in the time which it is official, it helps them because they oppose the [proposal] and hurts us because we want there to be as much transparency and publicity as possible about what is going on.”
Activists’ efforts and President Bush’s recent signing into law of the Sudan Accountability and Divestment Act of 2007, which makes it easier for fund firms to divest themselves from Sudan-related stocks by protecting them from lawsuits, hasn’t had much effect so far. Shops have indicated that they will continue working with and pressuring genocide-tainted companies as a way of effecting positive change, according to analysts. Franklin and Vanguard are two such shops.
T. Rowe Price notes the company has taken proactive steps to monitor risk in Sudan and other parts of the world, says spokesman Robert Benjamin. Cohen says a shareholder sent a proposal for two of the company’s funds Oct. 2, but Benjamin says they didn’t receive any such proposal for their funds. The company has no shareholder meeting scheduled for its funds this year, he says.
Unlike annual meetings for publicly traded companies, funds can “go years and years” without holding shareholder meetings where proposals would be presented, Cohen says.