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Taub on Mutual Fund Proxy Voting

Jennifer Taub, a professor at Vermont Law School, has published a paper entitled, "Able But Not Willing: The Failure of Mutual Fund Advisers to Advocate for Shareholders' Rights," examining how investment advisers to large mutual fund families cast proxy votes on shareholder-sponsored corporate governance resolutions.   This paper supports prior research findings that Advisers who have important business interests in the defined contripbution retirement plan business appear to place those interests in asset gathering ahead of their fiduciary duties to fund shareholders.  Taub takes her research one step further by examining ways in which this apparent conflict between asset gathering for defined contribution-related business lines and the interests of shareholders of the funds may be addressed.  Among Taub's suggestions is to borrow from British reforms by creating a uniform set of best practices for corporate governance. If such best practices are developed, fund advisers may then be required to report and justify any departure from casting proxy votes (related to management or shareholder proposals) in line with best practices.  The paper does recognize that fund advisers are only one of many intermediaries standing between "the underlying, risk-taking investor and the corporate managers who control the investor's capital."

The full text of Jennifer Taub's paper is available at:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1066831