You know those fat mailings you get each year from the companies in which you own stock? The annual reports, accompanied by ballot information, which you might stack in a pile or simply throw away?
Well, they're kind of important. Individual investors like you and I get to vote on whether the company can issue more shares, for example, which could dilute the value of our own shares. Executive compensation is usually on the ballot. Votes can also direct companies to do something such as reduce their environmental impact.
However, the lion's share of most public companies' stock is owned by big entities such as mutual funds. So if you care about how companies in which you own shares are run, you should probably care about how the funds you own are voting. Fortunately, that information is easier to find these days. At Proxy Democracy, for example, you can look up how your fund is voting, and how its record is rated by this activist organization.
The good ...
Look at the ratings that the Calvert Social Index (CSXAX) fund gets for voting against management proposals, for instance. It is among the most highly rated at Proxy Democracy (in the top 4%), earning an overall "activism" score of 69.3.
The fund ranks in the top 10% in all areas that Proxy Democracy tracks, including approving directors, executive compensation, corporate governance, and corporate impact. That makes a would-be socially responsible investor like me happy, and attracts my interest.
But should I invest in the fund? Unfortunately, it's probably not best to rely just on these kinds of metrics. With its recent top holdings including Johnson & Johnson
Its dividend yield was recently 1.6%, considerably lower than the S&P 500's hefty 3.7% trailing yield, and despite a relatively low annual expense fee of about 0.75%, some investors in the fund are being socked with a 4.75% sales load. That will shave a whopping $475 off of a $10,000 investment.
... And the not so good
Meanwhile, Proxy Democracy rates the popular Fidelity Contrafund (FCNTX) rather unimpressively, putting it in the bottom fifth overall. On environmental and social impact matters, for example, it voted with management 74% of the time, against management 1% of the time, and abstained 25% of the time.
Drill down for specifics on what the fund was voting on and you learn, for instance, that it voted against Tyco
Should we then avoid Contrafund? Well, maybe not. Even socially responsible investors want to retire in comfort, after all, and the fund's performance record is very strong, besting the S&P 500 handily over the past one, three, five, and 10 years. You might contact the fund's management, though, and share your concerns over its voting record.
You need to study funds closely before deciding which will get your money. If you care about social matters, find some compelling fund candidates and then check out their voting records.
