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Fund Families ranked on Director Voting

Some funds are more likely to vote against management than others, both on management- and shareholder-sponsored resolutions.

During 2004 US Investment Companies were required for the first time to publicly disclose their voting. Also during 2004 shareholders appeared to lose the battle for access to the proxy ballot in proposing their own nominees.

So for the mean time, boards and management go on appointing their own nominees, with funds’ votes having no direct bearing on the outcome of board elections. Some funds nevertheless research and vote on director nominees as if their votes counted. We are able to identify these funds by analyzing their proxy voting records.

Ranking Criteria.

I analyzed the voting behavior of 22 fund families (including 159 individual funds, reported in 47 N-PX filings), and ranked them on how ‘Activist’ the funds appeared to be on director elections.1


Fund Families were scored on two dimensions: (1) the extent to which they voted against board nominees (‘critical’) and (2) the extent to which they voted on individuals rather than on entire slates (‘discerning’). Based on the average scores on these two measures, funds were grouped into quadrants: Low Critical, Low Discerning; High Critical, Low Discerning; Low Critical, High Discerning; and High Critical, High Discerning.

Activist Bordering on Activist Complacent
Citizens Bridgeway Aim
Domini Calvert Ariel
Janus Green Century Dodge & Cox
Vanguard Integrity Dreyfus
Putnam Enterprise
T Rowe Fidelity
Investment Co of America
Merrill Lynch
Smith Barney


I’ve labeled as ‘Activist’ those funds which fall into the upper right quadrant. Activist funds are more critical and more discerning than their peers: they are more likely to vote against management recommendations for board nominees and also tend to apply a more individualized approach to voting on board nominees across their portfolio of companies. According to these criteria, the following four funds are Activist: Vanguard, Janus, Domini and Citizens. Two of the four Activist funds (Domini and Citizens) are SRI funds.

Bordering on Activist.

One fund that didn’t make the ‘Activist’ category is Green Century (high critical, low discerning), which opposed 80% of board nominees at its portfolio companies. However, all of its decisions were made at board level rather than at the level of individual nominees. Likewise, Calvert voted against management nominees 40% of the time, but only 1% of the time did they make an individualized voting decision.

Other funds, while not opposing many director nominees, did oppose selected individuals spread across a number of boards. For instance, Integrity group of funds (low critical, high discerning) only opposed 9% of nominees, but these were spread across 25% of its portfolio companies’ board elections.


I’ve labeled as ‘Complacent’ those funds that fall into the lower left quadrant. These are funds that are both less critical and less discerning than their peers. The majority of funds analyzed fall into this category. However, Dodge & Cox and Strong deserve special mention as not opposing a single director nominee across all portfolio company board elections.

Co-Nominees of fund trustees twice as likely to crack nod.

Funds showed reticence in voting against boards to which their own trustees were being nominated. Whereas the average support for management nominees was around 82% overall, boards to which fund trustees were being nominated achieved around 91% support from respective funds.

For those funds analyzed, only in one instance did a fund vote against its own trustee. Vanguard Institutional Index Fund and Total Stock Market Fund cast votes against J. Lawrence Wilson in the September 2003 director elections at Cummins Inc., while he served as a director of The Vanguard Group.

1. The data on which this analysis is based was compiled for The Corporate Library.

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