About the Mutual Fund Votes Survey
The AFL-CIO's Mutual Fund Votes Survey examines the votes cast by 78 of the largest mutual fund families on executive compensation at the public companies they are invested in. Mutual funds own more than one-fifth of all shares in U.S. public companies, giving them a great deal of influence in determining executive pay at these companies. The Mutual Fund Votes Survey will help investors and the public compare how specific mutual fund families voted on executive compensation issues.
The Mutual Fund Votes Survey compares the voting records of mutual fund families on executive compensation-related items that appear on proxy ballots. These items fall into three broad categories: shareholder proposals to reform executive compensation, executive compensation plans and say-on-pay votes. The survey examines mutual fund votes to determine whether mutual fund families voted to enable or constrain executive compensation relative to other mutual fund families.
For each category of votes, letter grades have been determined based on each mutual fund family’s voting record relative to the voting records of the other mutual fund families included in the survey. Funds that voted to constrain pay in a category more often than their peers received higher grades. Average grades have been determined based on the grades in the three categories.
How the Survey’s Average Mutual Fund Family Voted to Constrain Executive Pay
|Shareholder Proposals (FOR)||48%||42%||100%||0%|
|Executive Compensation Plans (AGAINST or ABSTAIN)||16%||10%||96%||0%|
|Say-on-Pay Votes (AGAINST or ABSTAIN)||14%||10%||100%||0%|
Shareholder proposals to reform executive compensation are frequently submitted for a vote at annual shareholder meetings. During the 2013 proxy season, shareholders submitted proposals on many issues, including to limit golden parachutes, to establish equity retention requirements, to prohibit the accelerated vesting of equity awards and to require greater use of performance-based compensation. Eight mutual fund families did not support any shareholder proposals on executive compensation. These eight and three other mutual fund families received a grade of F in this category. At the other end of the spectrum, 11 fund families received grades of A in this category, including three that supported all such proposals that they voted on. The median level of support by mutual fund families for shareholder proposals included in the survey was 42%.
Executive Compensation Plans
Executive compensation plans are submitted for shareholder approval by management at annual shareholder meetings. These plans include equity compensation plans, cash incentive plans and director compensation plans. The median level of opposition by mutual fund families to these executive compensation plans was 10%. The 12 mutual fund families that received grades of F in this category opposed less than 5% of executive compensation plans. The 12 mutual fund families that received grades of A in this category opposed plans more than 22% of the time.
Say-on-pay votes are advisory resolutions on executive compensation that are submitted for shareholder approval at annual shareholder meetings. Say-on-pay votes are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. These votes give management an opportunity to learn whether shareholders are satisfied with executive compensation practices. The median mutual fund family included in the survey voted against these say-on-pay votes 10% of the time. The 12 mutual fund family that received grades of F in this category voted against say-on-pay votes less than 4% of the time. Four mutual fund families cast no votes more than half the time. These and nine other fund families received grades of A in this category.