HOW FUNDS VOTE THEIR PROXIES

The Employee Retirement Income Security Act (ERISA) is a federal law that was enacted to protect the interests of employee benefit plan participants and their beneficiaries. It establishes minimum standards for pension plans and provides rules for employee benefit plans. While ERISA does not specifically lay out fiduciary responsibilities regarding proxy voting, the Department of Labor does consider the voting of proxies a fiduciary act of the management of the plan. Proxies are considered an asset of the plan and need to be voted in a manner that supports the shareholders of the company. There are also rules stating that it is the plan trustee who must decide how to vote. The bottom line is that they must vote, and how they do tells a lot about how the fund aligns with your values.

Online tools like Proxy Democracy track selected mutual fund voting on a range of ESG issues. You can also go to the fund sites and see their voting history. This is very telling, as a fund that basically rubber-stamps management on excessive CEO pay, does not support fair labor and human rights, and votes against climate disclosure on its shareholder proxy resolutions may not be aligned with your values.

Many pension funds also display their voting records on their websites. If they don’t, you can call your fund managers and ask for this information. Challenging how your money is invested in pension funds is difficult. First of all, pension funds generally own the entire market. Also, they have detailed procedures to make sure that they do not violate their fiduciary duty. If their investing philosophy is not in alignment with your values, you can talk to their staff to find out how to work your request through the proper channels. If enough pensioners sign letters, show up at investment committee meetings, and follow the prescribed process for change, you will get a fair hearing, and the pension fund may integrate your thinking into their future plans. It was this kind of pressure that got the world’s largest pension fund, NORGES to divest from coal.