DOL PROVIDES PROXY VOTING GUIDELINES

The Department of Labor has issued an Interpretive Bulletin on proxy voting that requires fiduciaries to reject any factor other than those relating to the “economic value of the plan’s investment.” Some examples of factors that an investment manager could consider, according to the DoL, include Board candidates, executive compensation, financing, and workforce development. However, the DoL, explained, plan fiduciaries should not seek to use proxy voting to “further legislative, regulatory, or public policy issues…” The DoL described voting linked to director/officer personal political contributions as “sufficiently remote” as to raise compliance concerns. Also in the Bulletin, the DoL indicated that fund managers could require benefit plan investors to adopt the fund’s proxy voting policies in order to avoid having to reconcile each plan investor’s policy.

OUR TAKE: The DoL is making clear that the job of the fiduciary is to make money for its clients, not to further a political agenda. This Bulletin may have a significant impact particularly on Taft-Hartley and public plans. The side paragraph for fund managers suggests that the proxy voting policy should be described in the PPM and acknowledged in the subscription documents.

http://www.dol.gov/federalregister/PdfDisplay.aspx?DocId=21630