Investments and Fiduciary Responsibilities-Voting Proxies
by Terry Knowles, Registrar of Charitable Trusts
As 2005 comes to a close it is a good time to begin the process of reviewing your organization’s policies and procedures.  One of the policies you may want to consider adopting relates to the voting of proxies.  If your organization holds shares of publicly traded stock or mutual funds you should receive an annual proxy statement from the corporation mailed in advance of its annual stockholders meeting.  Many nonprofit organizations do not understand the importance of this document and often fail to exercise their proxy rights as shareholders.  In the post-Sarbanes-Oxley era for-profit corporations are being held to a higher standard of conduct and one way for public charities and foundations to hold companies accountable is by reviewing the proposed resolutions and voting their proxies.  This is especially important if your organization has adopted a socially responsible approach to investing.

So what are proxies and why are they important? Proxies are “A written or electronic authorization used by a shareholder to authorize someone else to vote on their behalf at a shareholders meeting.  Corporations must send out proxies to all shareholders.”  A proxy is really just a ballot that permits a stockholder to either vote in favor of or against the resolutions proposed by management.  Therefore proxy voting allows shareholders to cast a vote when they can't attend a shareholder meeting in person and this power allows even small stockholders to have influence over the company's operations.  While large institutions like Harvard and Yale can have a significant impact on a publicly-traded company depending upon how their proxies are voted it is equally important for smaller organizations to read the resolutions proposed and to cast an informed vote on the changes requested by management.  If, for example, your investment policy prohibits the purchasing of stock in companies producing tobacco products and one of the mutual funds in your portfolio is proposing the purchase of a small cigarette company you should exercise your option to vote on that particular resolution or you may unknowingly be investing in the very products your investment policy prohibits.

Proxy voting is now being defined as a fiduciary responsibility and charities holding mutual funds and/or publicly traded stocks should develop proxy-voting guidelines and consider the establishment of a proxy committee to review resolutions and make recommendations to the board of directors.  More information on proxies may be found at the following website:   http://www.sec.gov/investor/pubs/mfproxyvoting.htm