Boston union members, Machinists members employed by toolmaker Stanley Works and community supporters joined AFL-CIO Secretary-Treasurer Richard Trumka and UNITE President Bruce Raynor July 31 at the Boston headquarters of Fidelity Investments to demand the mutual fund giant disclose its shareholder votes. The protest was the third "No More Business As Usual" event in three days.
The top shareholder of alleged corporate wrong-doers Enron, WorldCom and energy company Halliburton, Fidelity uses the voting power of its clients—including many union-sponsored retirement plans—to shape companies' corporate governance. But Fidelity refuses to disclose how it votes on any shareholder proposals, including the May re-election of Enron director Frank Savage to aircraft manufacturer Lockheed Martin's board and its plans for the upcoming vote on Stanley Works' proposal to reincorporate in the tax haven of Bermuda.
As the largest institutional shareholder in Stanley Works—with 7.6 percent of outstanding shares—Fidelity could make or break the company's proposed paper move that would shield the company from $30 million annually in U.S. taxes, dilute shareholder rights and make retirees pay capital gains on their shares while executives' stock options grow in value.
"We are here today to demand that Fidelity stop the secrecy," said Trumka.
There are already strong indications about how Fidelity votes. "Just last month," said Trumka, "they restated their policy that 'guidelines generally call for the funds to vote in support of management proposals.' In other words, they have generally voted to support the insiders who have brought this [corporate governance] crisis down on our heads."
Disclosure is especially important because of inherent conflicts of interest—mutual fund companies are in business to sell lucrative 401(k) retirement plans and other financial services to the same corporate decision-makers whose governance proposals they vote on. "Fidelity is the largest provider of corporate 401(k) plans, and counts Enron and Lockheed Martin among its many clients," Trumka wrote Securities and Exchange Commission Chairman Harvey Pitt on July 30, urging the SEC to adopt rules requiring mutual fund companies to disclose their shareholder proxy voting decisions.
Not waiting for Pitt to take action, activists on Wednesday asked Fidelity to make itself accountable now. "Stop propping up CEO salaries. Stop propping up runaway companies. Stop propping up Enron directors. Stop doing this with our money and stop hiding," Trumka said.
To read a report on how Fidelity's shareholder votes could have made a difference in corporate governance proposals, visit www.aflcio.org/fidelitydisclose.
Learn More
