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What is Fidelity Hiding?

Mike Garland, AFL-CIO

Shareholder Votes For Corporate Reform Could Have Made a Difference.
  • As a top shareholder of companies such as Enron, WorldCom and other alleged corporate wrongdoers, Fidelity Investments Inc. helps shape these companies' corporate governance. It appears that Fidelity used its clients' share voting power to support captive boards of directors, to overpay corporate execu-tives and to vote for conflicted audit committees at these troubled companies. Fidelity must disclose how it votes its equity holdings to allow its clients to monitor whether it supports corporate responsibility.
Fidelity Must Disclose How It Votes the Investments of Working Families.
  • Investment advisors have a fiduciary duty to vote the shares of their clients in a manner consistent with the best interests of their clients. Under the Employee
  • Retirement Income Security Act (ERISA), the voting rights attached to company stock are considered to be "plan assets" that must be managed in the best interests of pension plan beneficiaries. The chairman of the Security and Exchange Commission, Harvey Pitt, clarified in a letter dated February 12, 2002, to John Higgins, president of Ram Trust Services, that the same fiduciary standards apply to all investment advisors, including mutual funds. Unlike investment managers of defined-benefit pension plans who routinely disclose their voting decisions, mutual fund firms that manage 401( k) money, such as Fidelity, refuse to tell their investors how they voted.
  • Moreover, as the nation's No. 1 provider of company 401( k) plans, Fidelity may have an economic interest to vote shares to please company management, even if such a vote might not be in the best interests of Fidelity mutual funds or their beneficiaries. Fidelity faced conflicts of interests, for example, at Enron, which offered Fidelity funds in its 401( k) plan and at Lockheed Martin, where a Fidelity subsidiary was a co-fiduciary for employee benefit plans. The candidacy of an Enron director for a seat on Lockheed Martin's board faced significant investor opposition this year. By refusing to disclose its proxy voting, Fidelity prevents mutual fund investors from monitoring these conflicts of interest.
  • Only this spring, Fidelity announced it is opposing companies' plans to reprice options that increased their value. However, such a policy has little value unless Fidelity says how it is applied at specific companies. Disclosure of both the actual proxy votes cast and proxy voting guidelines will provide needed transparency, help reduce potential conflicts of inter-est and enable investors to make informed decisions about mutual funds.
As the World's Largest Mutual Fund Company, Fidelity Has a Responsibility For Corporate Accountability.
  • Fidelity is the world's largest mutual fund company and one of the most influential investors in the capi-tal market, managing a total of $1.5 trillion in assets, including managed assets of $859.8 billion and an additional $653.9 billion for which Fidelity performs record-keeping and other administrative services, as of May 31, 2002. With its 12.5 percent market share, Fidelity provides financial services for 17 million individual and institutional shareholders, including 11.2 million American workers.
  • Fidelity is the nation's No. 1 provider of 401( k) retirement savings plans and the No. 2 provider of 403( b) retirement plans for not-for-profit institutions.

As part of Fidelity's retirement business, the firm offers services to individuals, institutional clients, not-for-profit institutions, government entities and large
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