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Mon, 11/11/2002 - 01:00 | by Wesley Furgiuele
November 11, 2002
DOMINI APPLAUDS SEC MUTUAL FUND PROXY DISCLOSURE RULE
Socially Responsible Firm Calls on Shareholders to Do the Same
New York, NY– Domini Social Investments, manager of the Domini Social Equity Fund (NASDQ: DSEFX), sent a comment letter to the Securities and Exchange Commission (SEC) applauding its proposed rule issued September 19, 2002, mandating disclosure of proxy voting policies, procedures and voting records by mutual funds. The proposed rule comes less than a year after Domini filed a rulemaking petition with the SEC urging that it adopt this reform. The SEC specifically referenced rulemaking petitions filed by Domini, the International Brotherhood of Teamsters and the AFL-CIO in the proposed rule.
In 1999, Domini became the first mutual fund in America to publicly disclose its actual proxy votes. Domini publishes its current proxy votes on its website, www.domini.com. That same year, the California Public Employees’ Retirement System (CalPERS) became the first public retirement system to do so. Since then, several mutual fund managers and other institutional investors have begun disclosing their proxy votes, including the Calvert Group, MMA Praxis, Pax World Funds, Portfolio 21, Ethical Funds, the University of Wisconsin and Walden Asset Management.
Domini first provided its proxy voting guidelines to its fund shareholders in 1992, and began annual publication of the guidelines in 1996. Domini’s detailed guidelines cover more than 90 corporate governance, social and environmental issues.
In the firm’s comment letter, founder and CEO Amy Domini commends the SEC “for taking this bold step on behalf of mutual fund transparency, shareholder rights and improved corporate governance.”
“By embracing the principle that proxy voting is a fiduciary duty that must be exercised in the best interests of fund shareholders, the Commission has taken a critical step that necessarily implies — indeed, compels — disclosure,” writes Domini. “If proxy voting is a fiduciary duty of a fund’s investment adviser — and it clearly is — then it necessarily follows that there must be disclosure of the fund’s proxy voting policies, procedures and voting record.”
“The importance of this reform cannot be overstated,” writes Domini. “The Commission has chosen to act at a critical time. Restoring confidence in America’s corporate leadership and the integrity of financial markets requires that corporations be made more accountable to their shareowners and other stakeholders. Proxy voting transparency will protect America’s investors while having positive effects not only upon corporate governance, but on the social and environmental performance of corporations whose power and influence — and hence responsibilities — in our own society and globally have never been greater. We commend the Commission for taking this bold, but reasonable step forward.”
Domini’s comment letter discusses in detail the benefits accruing to investors as a result of proxy voting disclosure, and responds to arguments raised by some of the larger mutual fund managers and other opponents of reform. In particular, Domini argues that the proposed rule will address conflicts of interest between a fund’s shareholders and its investment adviser, that the cost of implementation will be minimal, and that proxy voting transparency will have the added benefit of improving corporate governance and contributing to greater corporate social responsibility over the long term.
Domini also highlighted the significant value of disclosing funds’ actual proxy votes, in addition to their guidelines and procedures. “We believe that the disclosure of each fund’s actual proxy votes is critically important. Without this disclosure, fund shareholders and regulators will have no way to know how the fund’s guidelines are being implemented in the real world. … Without disclosure of the fund’s actual votes, they will have no way to monitor potential conflicts of interest.”
“The Proposed Rule, if adopted, has the potential not only to make mutual funds more accountable to their shareholders, but to make corporations more responsible to their shareholders as well. This is a watershed event for all investors, and for all of us who have a stake in the accountability of publicly traded corporations,” says Adam Kanzer, General Counsel and Director of Shareholder Activism at Domini. “Mutual fund shareholders will now know how their funds are voting their proxies, and because mutual funds will be more accountable, they will be less likely to vote down the line with company management and more likely to take an independent view of what is in the best interests of their shareholders.”
With so much at stake, Domini has reached out to its shareholders urging them and other concerned investors to support the proposed rule by contacting the SEC. Shareholders can email their support through Domini’s website, www.domini.com, where they can also read Domini’s comment letter to the SEC and learn more about proxy voting. The public comment period continues through December 6, 2002.
Domini’s comment letter also asks the SEC to consider several suggestions for strengthening the proposed rule, including:
1. Several recommendations for how to make proxy voting information more accessible and usable by investors, including requiring that mutual funds that maintain websites providing this information online.
2. Issuing minimum requirements for general categories of disclosure that should be included in proxy-voting guidelines.
3. Requiring that proxy-voting disclosure by mutual funds and registered investment advisers be made consistent (Domini’s letter also commented on a companion rule issued the same day relating to registered investment advisers).
The text of the rule is published in the Federal Register and is available on the SEC’s website at www.sec.gov. Comments may be mailed (in triplicate) to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street NW, Washington, DC 20549-0609, or submitted by email to firstname.lastname@example.org. Comment letters should refer to File No. S7-36-02, and the file number should be included in the subject line of email messages. Electronically submitted comment letters will be posted on the SEC’s website.
Domini Social Investments manages more than $1.2 billion in assets for individual and institutional investors seeking to create positive change in society by integrating social and environmental criteria into their investment decisions. Its flagship fund, the Domini Social Equity Fund (NASDQ: DSEFX), was the first socially and environmentally screened index fund and is the nation's largest socially responsible index fund. The Fund seeks to include companies with positive records in community involvement, the environment, diversity and employee relations, and excludes companies deriving significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. In addition to the Domini Social Equity Fund, the company also offers the Domini Social Bond Fund (NASDQ: DSBFX) and an FDIC-insured money market account (in partnership with ShoreBank), both of which focus on community economic development.
Additional information about Domini Social Investments is available on the firm’s website, www.domini.com. Domini’s seventh annual Proxy Voting Guidelines & Shareholder Activism booklet is also available free of charge by calling 1-800-225-3863.
The Domini Funds are subject to market risks and are not insured. You may lose money. Some of the Domini Social Bond Fund’s community investments may be unrated and carry greater credit risks than its other investments. Please obtain a prospectus by calling 1-800-762-6814 or online at www.domini.com. Read it carefully before you invest or send money. DSIL Investment Services LLC (DSILD), Distributor. The Domini Social Equity Fund is not affiliated with any bank and is not insured. DSILD and ShoreBank are not affiliated.11/02