A proxy-voting study both reinforced and refuted attitudes about fund management. Chuck Jaffe sorts out the details.

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You can’t blame investors for being a bit paranoid about fund management, thinking that the brass always puts shareholder interests last.

The problem with that line of thinking is that it’s tough to figure out those times when management really is out to get you.

That’s why some investors took the release of the largest-ever study on mutual-fund proxy voting as a sign that fund firms are in the pocket of Corporate America, while others suggested the results show that management is doing everything right. The truth lies somewhere in the middle.

Since 2004, the U.S. Securities and Exchange Commission has required funds to disclose annually how they voted the proxy ballots for all companies in which they’re invested. The idea behind the disclosure is simple: Funds represent their shareholders, so those owners should know how management votes.

The disclosure forced many fund companies to get a lot more serious about the way they handled proxies. Funds now keep their proxy-voting policy on company Web sites, so that investors can learn how management is likely to vote on key issues like executive compensation, implementation of poison pills and anti-takeover measures and more. The record of votes winds up on the Web, too.

The Investment Company Institute — the trade association for fund-management companies — recently released the results of the most comprehensive study yet on how funds vote proxies, examining more than 3.5 million proxy votes cast by 160 of the largest mutual-fund companies for the 12-months ended June 30, 2007.

There had been several smaller studies which previously suggested that funds vote almost exclusively in favor of proposals made by corporate management and against proposals floated by shareholders. The latest ICI study did little to change that perception.

In general, funds support proposals pushed by management more than 90 percent of the time, while voting in favor of shareholder proposals less than 40 percent of the time.

That makes it look like fund firms simply rubber-stamp this stuff, but the data is a bit misleading.

The bulk of all ballot issues favored by management are housekeeping items, noncontroversial stuff where directors are running uncontested or the company is looking to ratify the selection of an auditor.

By comparison, shareholder proposals are rarely mundane, and some of the more esoteric ideas are silly.

For investors, what matters is that the fund company is looking out for your interests; you can find the proxy-voting guidelines.

“It’s clear that fund firms are a lot more thoughtful about this than they were in the past,” said Mercer Bullard, who runs Fund Democracy, an advocacy group for fund shareholders. “It still may not go as far as some investors want, but it’s been a big step forward.”

Chuck Jaffe is senior columnist at MarketWatch. He can be reached at cjaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.