Over the last few weeks, several readers dropped me lines to say they had been surprised by ugly calls from Fidelity Investments about their...
Over the last few weeks, several readers dropped me lines to say they had been surprised by ugly calls from Fidelity Investments about their mutual-fund accounts.
They wanted to know how to respond.
Fidelity wasn’t really checking up on shareholders and trying to make sure everything is OK — which is how some of the investors first took the call — but rather was calling to drum up proxy votes.
Specifically, Fidelity needs shareholders in many of its mutual funds to vote on a shareholder proposal that would make the firm’s investments “genocide-free,” avoiding companies known for extreme abuses of human rights.
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The proposal was filed with more than two dozen Fidelity funds, and many more issues from T. Rowe Price, Vanguard, Franklin Templeton and others.
Specifically, the proposal requests that fund boards “institute oversight procedures to screen out investments in companies that, in the judgment of the Board, substantially contribute to genocide, patterns of extraordinary and egregious violations of human rights, or crimes against humanity.”
It’s a noble cause, but Fidelity had asked the Securities & Exchange Commission last fall to exclude the shareholder-driven proposal from its proxies.
The basis for Fidelity’s argument — and many industry watchers say it has merit — is that investors are allowed to manage their investments but not to micromanage the process; the SEC doesn’t let shareholders dictate a company’s “ordinary business operations,” but it also doesn’t let fund firms exclude proposals that raise social issues.
So Fidelity had to issue proxies in preparation for a March 19 shareholder meeting and then for funds with subsequent meetings on April 16 and May 14.
As much as the firm didn’t want the vote, it really doesn’t want the issue to linger. As a general rule, funds know they can generate enough votes their way to defeat almost any proxy vote, if they get enough people to make a decision.
Getting a quorum, however, is hard to do when most investors don’t read proxies, which is why firms solicit votes — a fairly common industry practice — and make those surprising calls to shareholders.
The investors I spoke with — including MarketWatch colleague David Weidner, who wrote about his experience — all said they were given little information, no chance to have a new proxy sent to them and almost no information on precisely what they were being asked to decide. They were asked to make a decision by phone, on the spot.
All felt a bit wronged. A few said they voted against Fidelity, just to spite the company for not giving them much to go on (though they acknowledged having not read the proxy).
Had they truly wanted to show their displeasure, however, they should have hung up the phone without voting at all.
Chuck Jaffe is senior columnist at MarketWatch. He can be reached at firstname.lastname@example.org or Box 70, Cohasset, MA 02025-0070.