Tag Archives: pay enablers

Director Accountability: The 5 Worst Mutual Funds

Posted by on February 18, 2010 No comments

As I noted earlier this week, I have dusted off my copy of a study done by the Corporate Library, AFSCME and the Shareowner Education Network called Compensation Accomplices: Mutual Funds and the Overpaid American CEO. Filled with charts and tables, the study makes a couple of interesting findings. One that caught my attention as I reread the report was a table on page 20.

In 2007, the study found that certain mutual fund companies voted to support directors standing for election or reelection more than an astounding 90% of the time. This compares with the average rate of voting for directors by the mutual funds studies of 58%. What this means in real terms is this: Regardless of how well or how poorly companies performed, regardless of how directors performed in overseeing companies on behalf of shareholders, the worst offending mutual fund companies voted to reelect them.

So who are these mutual funds?

Here’s the list of the funds and their percentage votes in favor of directors:

  1. Fidelity -  92%
  2. Columbia – 97%
  3. Federated – 97%
  4. American Funds – 100%
  5. Scudder – 100%

Until mutual funds begin to take responsibility for their investments and demand that companies take the issue of director accountability, excessive compensation and related governance issues seriously, examples such as this will likely continue. But what can an ordinary investor do?

Simple. Vote down all proposals on their mutual fund proxies. A bit of overkill? Perhaps but it raises the discussion level on this serious problem. Clearly mutual funds don’t hear what individual shareholders are saying right now on this issue.

Barclays Needs to Detox

Posted by on February 17, 2010 No comments

On Tuesday, I noted that Barclay’s top executives chose not to take bonuses for their work in 2009. While I remain skeptical about how this will play out in terms of total compensation received by these fellows, I am downright cynical about how this also-ran strategy of handing back bags of cash after being caught in the till, so to speak. Regardless of what these top executives ultimately do, the exercise is symptomatic of a bigger problem: Barclay’s is a compensation enabler. As one of the largest institutional investors in the world, Barclay’s has the responsibility for voting a vast array of proxies for companies they are invested in. What is troubling is that they seem as committed to allowing executives of companies held in their portfolios to e equally overpaid.

Are Barclays officials like alcoholics running a rehab center?

A study done in 2009 suggests this is the case. Titled, Compensation Accomplices: Mutual Funds and the Overpaid American CEO, the study chronicles a number of large mutual fund companies and how they voted their proxies on a set of key compensation proposals. Not surprisingly, many mutual funds tended to support management when it came to executive pay practices.

What I found interesting as I revisited this report was the list of the “Pay Enablers.” What was no surprise to me was that Barclay’s consistently held its place as one of the top 5 Pay Enablers in all categories of the study. They supported management proposals on executive pay  98% of the time. Conversely, they opposed shareholder proposals seeking to rein in executive pay 90% of the time.

This of course, is done in the “best interests of Barclays’ mutual fund investors. Sort of a “just have another drink tonight and we’ll talk about your problem tomorrow” solution to a problem that can’t be ignored.