Communications Workers of AmericaVia Fax & Mail December 4, 2002 Mr. Jonathan G. Katz, Secretary
Dear Mr. Katz: Re: File No. S7-36-02 On behalf of the 700,000 members of the Communications Workers of America (CWA), I am writing to express strong support for the Securities and Exchange Commission's recent proposal, S7-36-02, Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies. I strongly support those provisions that would require mutual funds to disclose their actual votes cast. CWA members participate in employer-sponsored defined benefit pension plans with assets of several tens of billions of dollars. Individually, they invest in a variety of defined contribution plans, including 401(k) plans that offer mutual fund investment options. Mutual funds have enormous potential to improve corporate governance at U.S. companies. Proxy voting is the main vehicle through which shareowners can participate in the governance of a corporation. Mutual funds own roughly 20 percent of U.S. corporate equity. Thus, proxy-voting power can be instrumental in protecting retirement savings from the consequences of weak corporate governance. The rule addresses potential conflicts of interest in voting proxies that could lead mutual funds to vote with management even if such votes are not in the best interest of our members. For instance, mutual funds may be automatically voting with management in order to garner profitable 401(k) and other business from companies where proxies are being cast. But unlike our other investment managers-who are required under ERISA to tell us how they vote-mutual funds have until now shielded their proxy voting from investor and regulatory scrutiny. Disclosure of proxy votes and voting policies would put pressure on fund managers to refrain from the unilateral rubberstamping of management's decisions, and would provide investors an additional tool for evaluating and distinguishing among various funds in the marketplace. Transparent voting policies would allow individuals to place their money in funds that promote good corporate governance, and the SEC has noted that such disclosures: "may encourage funds to become more engaged in corporate governance of issuers held in their portfolios, which may benefit all investors, and not just fund shareholders." The proposed rule is consistent with other recent SEC efforts to enhance mutual fund communications with investors, such as including plain English prospectus and more detailed disclosure regarding investment strategies, fees, and risks. This new rule promises to be relatively easy to implement and low in cost. Smaller fund companies have been voting proxies and disclosing both individual votes and voting processes for some time, with little cost to investors. Many funds already internally track their votes in some manner, and have undisclosed voting guidelines and procedures in place. The largest public pension in the world, CalPERS, has disclosed its votes and guidelines since 1999. It does this through web site databases, and hard copy disclosure on request. I commend the Commission for proposing a rule that will end a double standard that has allowed mutual funds to turn a blind eye to the kinds of corporate governance failures that have cost our members dearly as workers or as investors at Global Crossing, WorldCom, Enron, and Tyco among others. Investors have been seeking accountability and transparency from companies. The Commission's proposed rule would give investors the information they need to ensure that their mutual funds take their proxy voting responsibility seriously. I thank you for the opportunity to comment on this proposal on behalf of the CWA, the CWA Members' Relief Fund, and the CWA Pension Plan.
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