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March 9, 1989
TO: PENSION MEMBERS NO. 14-89
INVESTMENT ADVISER MEMBERS NO. 21-89
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 20-89
RE: DEPARTMENT OF LABOR PROXY PROJECT REPORT
__________________________________________________________
As you know, the Department of Labor in 1988 announced the
initiation of an enforcement project to monitor how investment
managers with control over employee benefit plan assets exercised
their fiduciary responsibility under the Employee Retirement
Income Security Act (ERISA) in voting the stock owned by the
plans whose assets they manage. (See Institute Memorandum to
Pension Members No. 32-88, Investment Adviser Members No. 22-88,
and Investment Adviser Associate Members No. 22-88, dated May 24,
1988.) This review sought to determine the state of compliance
with these fiduciary responsibilities in light of the guidance
provided in a letter released by the Department in February 1988.
(See Institute Memorandum to Pension Members No. 15-88,
Investment Adviser Members No. 9-88, and Investment Adviser
Associate Members No. 8-88, dated March 3, 1988.)
Attached is a copy of the Department's Proxy Project
Report, which describes the results of its review of such voting
practices based on responses from 111 investment managers. The
report concludes that investment managers have gained an
increasing awareness of their responsibilities in this area. For
example, a number of investment managers report that they are now
incorporating specific language in their management agreements to
clearly designate voting responsibility, establishing procedures
to monitor receipt of proxy ballots, implementing recordkeeping
with respect to proxy votes, and formalizing their policy
positions.
The report cautions that properly designated investment
managers may not, as a general policy, decline to vote proxies,
vote only non-controversial proxies, or accept direction from
others. In addition, the Department emphasizes the need for
proper recordkeeping and documentation with respect to proxy
votes in order for the named fiduciary to be able to monitor the
activities of the investment manager.
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We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment