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Mutual Neglect: How the Largest Institutions in the Stock Market Ignore Health Problems and Financial Threats Stemming From Toxic Product Liabilities

Bill Baue, Jonas Kron, Sanford Lewis, Richard A. Liroff, Tim Little
February 2008
Toxic chemicals in products may create liabilities for companies and their shareholders. This report reviews the voting records of major mutual funds on shareholder resolutions introduced in 2006-2007 addressing toxic chemical issues. Most major funds routinely vote against or abstain from voting on these resolutions. The report notes, however, encouraging signs at pension fund TIAA-CREF and at large government employee pension funds and in guidelines from proxy voting advisory service Institutional Shareholder Services. The report offers recommendations to the mutual fund industry and to investors in mutual funds.
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The biggest bloc of votes cast on toxics-related resolutions is cast by mutual funds--the largest category of institutional shareholders in U.S. stock markets, collectively holding more than one third of assets invested in U.S. companies. This report examines proxy voting records of 64 major families of mutual funds on 15 toxics-related shareholder resolutions. Most funds routinely vote against these resolutions. There are some prominent exceptions, such as TIAA-CREF and some large government employee pension funds. Resolutions tend to draw more support from funds when proxy advisory service Institutional Shareholder Services (ISS) recommends a "yes" vote; ISS has recently revised its guidelines to recognize the need for companies to better address toxic chemicals in their supply chains. The report offers a series of recommendations, including broader mutual fund adoption of proxy voting guidelines similar to those of TIAA-CREF and ISS.