BOSTON - Fidelity Investments is getting tougher on Corporate America.
New data from the Boston mutual fund giant shows a rise in how often it voted against management proposals in the just-concluded proxy season. It also opposed company pay plans and the election of company directors more frequently.
A Fidelity spokeswoman said the results stem from policies such as that it vote against directors who don't follow through on promises to reform CEO compensation.
The votes come after a grim year for stocks and tough talk about executive pay from Washington, and could presage similar votes by other big investors, said Rhonda Brauer, a corporate governance adviser for proxy solicitor Georgeson Inc in New York.
Institutional investors are going to be looking at the performance of boards and managers much more closely, she said.
Voting by mutual fund firms at annual meetings has received heightened attention following criticism that the firms frequently rubber stamp management proposals to make it easier to win contracts like running company 401(k) retirement-savings plans.
With more than a trillion dollars of mutual fund assets, Fidelity's votes are closely watched as an indicator of the investment industry's mood.
Data that Fidelity provided to Reuters show that it voted against at least one management recommendation at 50 percent of the shareholder meetings at which it voted this past proxy season, up from 41 percent a year ago and 38 percent the year before.
Fidelity also said it voted against 55 percent of all executive compensation plans put before it at U.S. companies this year, up from 46 percent the previous year. And, it said it voted against 23 percent of directors seeking election at U.S. companies, up from 17 percent a year ago.
In an email a Fidelity spokeswoman said the fund company often voted against directors who had poor attendance at board meetings, adopted golden parachute pay plans, or did not follow through on promises to change governance or pay practices.
For instance, filings by Fidelity's well-known Magellan fund show it cast votes this year against all 12 directors proposed by the management of Delta Air Lines Inc (DAL.N). The fund also withheld votes for the 10 directors proposed by the management of Google Inc (GOOG.O), filings show.
Studies of full mutual fund industry voting trends for the just-concluded proxy season aren't yet available. Another fund giant, Vanguard Group Inc, said that its proxy voting patterns were similar this year to previous years by measures such as how often it supported directors or approved compensation plans.
That's because many companies have already made changes the fund firm has pressed for in private talks, said Glenn Booraem, who oversees Vanguard's proxy voting. The voting results only tell part of the story, he said.
But Beth Young, who studies fund voting for The Corporate Library, a research firm in Portland, Maine, said she expects a greater number of votes against directors and pay plans this year in the wake of the recession's impact on company profits and share prices.
When performance is down it is much easier to see a pay-for-performance disconnect, Young said. When it comes to directors, for instance, major investors are getting off the assumption that you just vote for the incumbent and that's a good thing, she said. (Editing by Steve Orlofsky)