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Mutual Funds: Stop 'Supporting' Excessive CEO Pay

Mutual fund companies are a prime enabler of excessive CEO pay, according to a new report by AFSCME and The Corporate Library.

The study, "Enablers of Excess: Mutual Funds and the Overpaid American CEO," reveals that Morgan Stanley Funds, AIM Investments, Dreyfus Corporation, AllianceBernstein and OppenheimerFunds lead the pack of investment firms found most complicit in enabling runaway executive pay. They do so by overwhelmingly voting for management compensation proposals and against shareholders who, by a large majority, call for CEO compensation reform.

"Like a bartender who pours drink after drink for a patron with an obvious drinking problem and no way home, these mutual funds are helping to feed the executive compensation beast with no regard for the consequences," says AFSCME International Pres. Gerald W. McEntee.

The study analyzed the proxy votes cast by 18 of the 25 largest mutual funds at 1,642 meetings between July 2004 to June 2005. It found that they voted for the compensation proposals 75.6 percent of the time - almost three times as often as for shareholder proposals, most of which call for reforming CEO pay policies.

If mutual fund companies will not stand up for investors, it's time for public pension funds to use their clout to put the brakes on CEO pay, says Mike Musuraca, designated trustee for DC 37 Exec. Dir. Lillian Roberts, to the New York City Employees' Retirement System. "Pension fund trustees should use the report to closely question mutual fund managers who appear before their pension boards about their support for outrageous CEO pay packages," he explains. "Investment managers who seek to do business with public pension funds need to be made aware of our concerns. Managers need to change their behavior in order to protect shareholders and not continue to enable CEOs in picking the pockets of average shareholders and workers."

To learn more, and to see a list of AFSCME recommendations, read the report and a press release National newspapers, such as the Los Angeles Times and Wall Street Journal, also covered the story.

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