Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises
Committee on Financial Services
United States House of Representatives

Hearing on “Corporate Governance and Shareholder Empowerment”

Statement of the Investment Company Institute

April 21, 2010

I. Introduction

The Investment Company Institute appreciates the opportunity to submit its views on four issues addressed in one or more of the bills1 being considered by the Subcommittee: proxy access; broker discretionary voting; disclosure of proxy votes; and mandatory independent board chairs.

ICI is the national association of U.S. investment companies. ICI members have total assets of nearly $12 trillion and serve almost 90 million shareholders. Our members include mutual funds, closed-end funds, exchange-traded funds (ETFs), and business development companies (BDCs), which in this statement we refer to collectively as “investment companies” or “funds.”

In addition to their role as the investment vehicle of choice for millions of Americans, investment companies have been among the largest investors in the domestic financial markets for much of the past 15 years and held a significant portion of the outstanding shares of U.S.-issued stocks, bonds, and money market securities at year-end 2009.2 Indeed, investment companies as a whole were one of the largest groups of investors in U.S. companies, holding 28 percent of their outstanding stock at year-end 2009.3

Based on their dual roles as major investors in securities of public companies acting as fiduciaries on behalf of millions of individual investors, and issuers of securities with their own shareholders and boards of directors, investment companies offer a valuable perspective on the subject matter of today’s hearing.

II. Shareholder Access to Company Proxy Materials

Section 2 of H.R. 2861 directs the Securities and Exchange Commission (SEC) to require, by rule, that issuers permit their shareholders to vote on candidates for the board of directors who have been nominated by shareholders who, in the aggregate, have owned at least one percent of the company’s voting securities for at least two years. The practice of permitting shareholders to nominate directors on a company’s proxy statement is commonly referred to as “shareholder access to company proxy materials” or “proxy access.”

H.R. 2861’s proxy access provisions encompass all issuers which, as a technical matter, includes investment companies. It is by no means clear, however, that investment companies raise the policy concerns the bill’s sponsors are seeking to address. Indeed, while the SEC has developed a vast administrative record related to proxy access requirements for public operating companies through its consideration of this issue multiple times over the years, nowhere has it been established that proxy access requirements are necessary or appropriate for investment companies or, if so, what form they should take.

Below we provide our views on the application of proxy access requirements to investment companies, followed by our views on proxy access requirements for public operating companies.

A. Application of Proxy Access Requirements to Investment Companies

ICI is concerned that applying proxy access requirements indiscriminately to all issuers, including investment companies—as Section 2 of H.R. 2861 in its current form would do—fails to take into account the significant differences in governance models between public operating companies and investment companies. In particular, most funds today are part of complexes comprised of multiple funds that share the same investment adviser and other key service providers. As a result, significant efficiencies are realized when a single or relatively small number of boards oversee all of the funds. Boards of these funds generally are organized according to one of two models—a “unitary” board consisting of one group of directors who serve on the board of every fund in the complex, or “cluster” boards consisting of two or more separate boards of directors within the complex that each oversees a different group of funds. Clusters typically are organized according to investment objective or investment sector, or result from a merger of complexes that were initially organized by different management companies.

The benefits of unitary and cluster boards include enhanced board efficiency and greater board knowledge of the many aspects of fund operations that are complex-wide in nature. For example, fund directors are required to establish standards for the valuation of portfolio securities and review compliance procedures. The standards that govern directors’ determinations in these areas apply to all funds in the same complex, and consistency among funds greatly enhances both board efficiency and shareholder protection, as there is less likelihood for compliance errors if all funds within the complex operate under consistent procedures. For these and other reasons, director oversight of multiple funds within a complex has served shareholders well.4

Requiring funds to include shareholder-nominated directors on their proxy statements would risk disrupting this efficient and effective corporate governance mechanism, and should not be done without considerable forethought, a clear demonstration of the need to make this change, and appropriate tailoring of the requirements to the unique characteristics of investment companies. If a fund complex consists of multiple registered investment companies with a unitary or cluster board, and a shareholder in one of the registered funds nominates a director who is elected, the complex will have two equally undesirable alternatives. It may abandon its unitary or cluster board structure, thus losing the important benefits discussed above. Alternatively, it may continue to hold joint board meetings, but have to prepare separate or redacted materials for the one director (who, unlike the board’s other members, would not be a fiduciary to the other funds overseen by the rest of the directors), and incur the disruption of having that director excuse himself at various times during the meeting to preserve the confidentiality of information pertaining to the other funds. Either way, fund shareholders will bear the associated additional costs.

Investment company shareholders enjoy special protections that also must be taken into account in considering the need for, and formulating, any proxy access requirements for investment companies. Unlike investors in operating companies, shareholders of investment companies are guaranteed the right to participate in key decisions. For example, investment companies are prohibited from borrowing money, issuing senior securities, underwriting securities issued by other persons, purchasing or selling real estate or commodities, or making loans to other persons, except in accordance with the policy established in the fund’s registration statement, without first obtaining shareholder approval.5

As the Subcommittee is aware, the SEC recently published for public comment a proposal that would provide shareholders with the ability to nominate directors on a company’s proxy statement.6 Like H.R. 2861, the SEC’s rule proposal would apply to all issuers, including investment companies. Due to the differences between investment companies and operating companies discussed above, the lack of empirical analysis of the impact of the proposal on investment companies, and the absence of any demonstrated need for proxy access requirements in the investment company context, ICI has urged the SEC not to apply its current proposal to investment companies.7 Instead, we have called for the SEC to consider first whether a proxy access proposal should apply to investment companies at all, and only if so, how it could craft a new proposal better suited to the unique attributes of investment companies.

Similarly, we cannot support the proxy access provisions of H.R. 2861 in their current form—in no small part because they would extend specific, blanket requirements to investment companies, even though the work necessary to establish a sound policy basis for doing so has not been done. Should Congress instead pursue legislation confirming the SEC’s authority to adopt proxy access requirements,8 we recommend that such legislation also require the SEC to take into account relevant differences between operating companies and investment companies in applying any final proxy access rules to investment companies.

B. Application of Proxy Access Requirements to Public Operating Companies

In contrast to the lack of analysis with respect to investment companies, there has been considerable public debate over the application of proxy access requirements to public operating companies. ICI has been an active participant in this debate.9 The topic has been a polarizing one. In contrast to others who may fall clearly on one side of the debate or the other, ICI members have one foot in each camp. As noted above, funds are significant shareholders of public companies. They also are public companies with their own shareholders and boards of directors. As a result, they fully appreciate the importance of effective corporate governance and also are cognizant of the need to avoid undue interference with a company’s directors and officers who are responsible for its management. ICI believes there is a need to carefully balance these interests when addressing shareholder access to company proxy materials in the public operating company context.

When we testified before the full Committee on Financial Services in 2007, we provided our views on then-pending SEC proposed rule amendments that would have permitted shareholders to include in company proxy materials their proposals for bylaw amendments regarding the procedures for nominating directors.10 We stated then, and continue to believe now, that the interests of investors will be served by allowing shareholders, under certain circumstances, to have their proposals for bylaw amendments concerning procedures for nominating directors included in a company’s proxy statement. Permitting companies and their shareholders to work together to tailor companies’ governing documents to suit the specific interests of the company and its shareholders has the benefit of accommodating recent state law developments,11 and allowing firms to craft their own proxy access regime. It also would relieve the federal government of having to draw arbitrary lines to establish eligibility requirements.

We oppose at this time, however, the creation of a federally mandated requirement that would force all public companies, at their expense, to allow shareholders to nominate directors on a company’s proxy statement, as would be provided by H.R. 2861. We would not object to Congress confirming the SEC’s authority to adopt rules requiring proxy access (as the current versions of financial services reform legislation pending in the House and Senate would do). We believe that the SEC should be given the latitude to determine the exact contours of rules regarding whether, how, and in what circumstances shareholders will be permitted to nominate directors.12 The SEC staff has been diligently analyzing hundreds of comment letters and meeting with interested persons in an effort to develop final rules that balance the twin goals of protecting investors and not placing undue costs on the companies to which the rules will apply.13 Investors would be best served if Congress permits the SEC to complete its deliberative process, even if the ultimate result does not correspond exactly to Section 2 of H.R. 2861.

For example, the SEC’s recent proposal would establish the criteria a shareholder would have to meet to nominate directors on a company’s proxy statement.14 H.R. 2861 would establish different criteria for the same purpose. In addition, H.R. 2861 and the SEC proposal place different limits on the number of permissible shareholder nominees.15 Comment letters on the SEC’s proposal expressed a variety of views on these (and many other) issues. Directing a specific outcome, as H.R. 2861 does, runs a significant risk of losing benefits that can be achieved through a studied evaluation of a robust public dialogue and eliminating important flexibility for the SEC to tailor requirements as may be warranted in different circumstances.

III. Elimination of Broker Voting on Uncontested Elections of Investment Company Directors

Section 2 of H.R. 2861 directs the SEC to prohibit, by rule, the practice of brokers voting securities they hold on behalf of customers in uncontested director elections, in the absence of voting instructions from the customer. This practice is commonly referred to as “discretionary broker voting.” Section 2 would apply to director elections held by all issuers, which would include investment companies.

This provision appears to be intended, in part, to codify a recent change to New York Stock Exchange Rule 452 that generally would prohibit broker discretionary voting for the uncontested election of directors. That rule change, however, expressly excepted registered investment companies, permitting brokers to continue to vote such shares—a result that was reached through an extensive deliberative process.16 The decision to exempt registered investment companies was based on the premise that “the unique regulatory scheme governing registered investment companies made such companies sufficiently different from operating companies” and that “they are subject to regulation under the Investment Company Act of 1940, which also regulates shareholder participation in key decisions.”17 Consideration also was given to the heightened problems that registered investment companies have in achieving quorums because of their disproportionately large retail shareholder base and because the vast majority of fund shares are held through intermediaries (primarily brokers and banks).

The drafters of Section 2 of H.R. 2861 may not have intended to override the NYSE’s exception for registered investment companies, but that is exactly what Section 2 would do. This would be an extremely costly and unnecessary change for investment companies and their shareholders. Eliminating discretionary broker voting for fund directors undoubtedly would create significant difficulties for funds in achieving quorums and getting directors elected. Our members report significant difficulties in achieving quorums and getting matters approved when brokers are not permitted to vote. Frequently it is necessary for funds to engage soliciting firms and conduct multiple mailings to obtain quorums, and funds still often must adjourn meetings due to inadequate voting response. As a result, the costs of proxy solicitations when brokers are not permitted to vote are significant—costs ultimately borne by shareholders.

These concerns are supported by data. Based on an analysis of 986 shareholder meetings held by investment companies, ICI published a report that found that eliminating discretionary broker voting would have a disproportionate impact on funds and would create significant difficulties for funds because, among other things, they have a far higher proportion of retail shareholders than most operating companies (and retail shareholders are less likely than institutional shareholders to vote their proxies). As a result, the report concluded that funds will have significant difficulties achieving quorums and electing directors if broker voting is eliminated and, in turn, that the proposal would significantly increase costs for funds as they conduct multiple solicitations to try to achieve quorums.18

While we believe that shareholder voting for directors is an important component of a strong corporate governance structure, prohibiting discretionary broker voting in the context of funds simply is not justified given the costs. It will not increase fund shareholder voting or empower fund shareholders. In fact, we are not aware of any fund shareholders who have voiced dissatisfaction with the current proxy voting process as it relates to the uncontested election of directors. Nor do we believe that the current process entails any detrimental effects on funds or fund governance. Because these elections are uncontested, the same directors, in virtually every case, will be elected whether or not funds and their shareholders bear the additional costs.

For these reasons, ICI strongly recommends that Section 2 of H.R. 2861 be revised to retain discretionary broker voting with respect to funds.

IV. Proxy Vote Disclosure

H.R. 3351 contains a provision that would require every institutional investment manager to disclose, at least annually, all of its proxy votes. We strongly support this provision.

Since 2004, funds—alone among all institutional investors—have been required to publicly disclose their proxy votes.19 As a result of this unique disclosure requirement, in 2008 ICI was able to conduct the broadest study of funds’ proxy votes ever undertaken, covering more than 3.5 million proxy votes cast by 160 of the largest fund families in 2007.20 That research indicates, among other things, that: (1) funds devote substantial resources to proxy voting; (2) funds vote proxies in accordance with their board-approved guidelines; (3) funds do not reflexively vote “with management,” as some critics claim, but rather make nuanced judgments in determining how to vote on both management and shareholder proposals in order to promote the best interests of funds and their shareholders; and (4) fund voting patterns are often broadly consistent with vote recommendations of proxy advisory firms, although here also our research shows that funds do not reflexively adopt the recommendations of proxy advisors. We are currently in the process of updating the study to cover proxy votes cast by funds over the three year period 2007 to 2009. This update should help begin to establish whether there are any apparent trends in how funds vote.

Unless current law changes, however, one aspect of fund proxy voting that will remain undocumented is how fund votes compare with those of other institutional investors. At present, such a comparison is not possible because other institutional investors are not required to disclose their proxy votes. H.R. 3351 would expand the transparency currently provided by funds to all institutional investors.

We have long advocated for such a provision.21 In the aggregate, institutional investors other than funds hold approximately thirty-five percent of outstanding U.S. equity securities. Requiring these investors to disclose proxy votes would significantly enhance the quality of the debate concerning how the corporate franchise is used. This is particularly true in the context of the types of “say on pay” and “golden parachute” proposals that are contained in H.R. 3351 and the other bills considered by the Subcommittee today, where the public disclosure of advisory votes would maximize their influence over management.

We are not alone in calling for increased transparency about the proxy votes of other institutional investors. As early as 2003, House Financial Services Committee Chairman Barney Frank questioned the appropriateness of a proxy voting disclosure requirement specific to funds.22 The late Senator Edward M. Kennedy commissioned a 2004 GAO study that concluded, among other things, that workers and retirees would benefit from increased transparency in proxy voting by pension plans.23 More recently, a number of notable commentators have supported the notion, including the Investors’ Working Group, an independent task force sponsored by the CFA Institute and Council of Institutional Investors and chaired by former SEC Chairmen Arthur Levitt and William Donaldson.24 The AFL-CIO has also strongly supported increased transparency in proxy voting by all capital market participants,25 and voluntarily discloses its proxy votes and proxy voting policies even though it is not legally required to do so.

Versions of the provision in H.R. 3351 have found support in Congress. Most recently, the House passed H.R. 4173.26 Section 2002 of that Act includes proxy vote disclosure for all institutional investors, but only with respect to the “say on pay” and “golden parachute” provisions that are contained in that Act. While we supported the proxy vote disclosure provision in H.R. 4173, we prefer the version in H.R. 3351 as it would cover all proxy votes cast by institutional investors.

In its consideration of the corporate governance bills today, we urge the Subcommittee to support the provision in H.R. 3351 that would extend proxy vote disclosure to all institutional investors. Proxy vote disclosure achieves important public policy purposes, and should not be limited solely to funds.

V. Mandatory Independent Board Chair

H.R. 2861 and H.R. 3272 essentially would require every issuer to have an independent board chair. We oppose these provisions. ICI is not aware of any substantial or reliable evidence of proven benefits that would justify imposing such a requirement on all public companies. Instead, we believe the selection of an appropriate person to serve as board chair rightfully is, and should continue to be, a decision made by the directors themselves. This is particularly true in the case of investment company boards of directors, which are robustly independent.

The Investment Company Act requires that at least 40 percent of the directors on a fund board be “independent.” Under SEC rules, virtually all funds are required to have at least a majority of directors who are not “interested persons,” as defined in the Act. In practice, the proportion of independent directors is significantly higher throughout the industry. In nearly 90 percent of fund complexes, 75 percent or more of fund directors are independent.27 In addition, although there is no legal requirement for a fund board to have an independent chair or independent lead director, nearly 84 percent of fund boards do.28 Moreover, the Investment Company Act requires many key decisions—including approval of the fund’s advisory contract—to be approved by a majority of the independent directors.

Notably, the SEC in the past sought to mandate that fund boards have an independent chair, adopting rule amendments to that effect in 2004.29 In response to legal challenges, however, the amendments were struck down twice by a federal appeals court.30 The court’s decisions did not address the merits of an independent chair requirement for investment companies. Rather, the court found deficiencies in the SEC’s rulemaking process. Still, it is telling that the amendments never took effect.

Seeking to bolster the administrative record in support of the rule amendments, the SEC in 2007 published for comment two studies prepared by its Office of Economic Analysis (OEA).31 In our view, neither OEA study provided any compelling evidence that independent chairs enhance shareholder protections or shareholder value, either in the investment company context or in the case of operating companies.32 One of the studies suggested that the optimal board structure may vary from firm to firm. Thus, the studies failed to provide an empirical basis for the independent chair requirement and instead called the imposition of such a requirement into serious question. We are not aware of any more recent academic or other studies that would alter this view.

The SEC took no further action in this area until last year, when it adopted new requirements for all issuers, including investment companies, to disclose information about their board leadership structure and why the company believes its structure is the most appropriate for that company.33 The SEC stated that “in proposing this requirement, we noted that different leadership structures may be suitable for different companies depending on factors such as the size of a company, the nature of a company’s business, or internal control considerations, among other things.”34 We agree. Additional required transparency concerning board leadership structures may encourage some companies to focus more intently on the effectiveness of their particular leadership structure and should make it easier for investors who consider this information important to make informed investment and proxy voting decisions. Given the lack of empirical evidence that having an independent chair correlates directly with better outcomes for shareholders, the SEC’s disclosure approach is far preferable to forcing a uniform leadership structure on all companies, as H.R. 2861 and H.R. 3272 would do.

VI. Conclusion

On behalf of ICI’s members and the millions of individual shareholders they serve, we very much appreciate the opportunity to share ICI’s views with you. We look forward to working with the Subcommittee on these important issues.


1 H.R. 2861, the “Shareholder Empowerment Act of 2009,” H.R. 3272, the “Corporate Governance Reform Act of 2009,” and H.R. 3351, the “Proxy Voting Transparency Act of 2009.”

2 Investment Company Institute, Investment Company Fact Book (50th ed. 2010), forthcoming, at p. 11. For published information for year-end 2008, see Investment Company Fact Book (49th ed. 2009), available at http://www.icifactbook.org.

3 Id.

4 For a more detailed discussion of the many benefits of unitary and cluster boards, see Independent Directors Council Task Force Report, Director Oversight of Multiple Funds (May 2005), available at http://www.idc1.org/pdf/ppr_idc_multiple_funds.pdf.

5 See Sections 8(b) and 13(a) of the Investment Company Act of 1940. See also Letter from Paul Schott Stevens, President and CEO, Investment Company Institute and Michael S. Scofield, Chair, Governing Council, Independent Directors Council to Mary L. Schapiro, Chairman, Luis A. Aguilar, Commissioner, Kathleen L. Casey, Commissioner, Elisse B. Walter, Commissioner, and Troy A. Paredes, Commissioner, U.S. Securities and Exchange Commission, dated April 7, 2010 (discussing unitary and cluster boards and shareholder rights under the Investment Company Act) (“2010 ICI Proxy Access Submission”), available at http://www.ici.org/pdf/24235_letter_to_sec.pdf.

6 See SEC Release Nos. 33-9046; 34-60089; and IC-28765 (June 10, 2009), 74 Fed. Reg. 29024 (June 18, 2009); and SEC Release Nos. 33-9086; 34-61161; and IC-29069 (December 14, 2009), 74 Fed. Reg. 67144 (December 18, 2009) (re-opening the comment period).

7 See Letter from Paul Schott Stevens, President and CEO, Investment Company Institute, to Elizabeth Murphy, Secretary, U.S. Securities and Exchange Commission, dated August 17, 2009 (“2009 ICI Comment Letter”), available at http://www.ici.org/pdf/23725.pdf; and 2010 ICI Proxy Access Submission.

8 We note that Section 7222 of H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, passed by the U.S. House of Representatives on December 11, 2009, and Section 972 of S. 3217, the Restoring American Financial Stability Act, passed by the U.S. Senate Committee on Banking, Housing and Urban Affairs on March 22, 2010, address proxy access in this manner.

9 See, e.g., Statement of Paul Schott Stevens, President and CEO, Investment Company Institute, on “SEC Proxy Access Proposals: Implications for Investors,” before the Committee on Financial Services, United States House of Representatives (September 27, 2007), available at http://www.ici.org/policy/governance/corp_governance/07_house_proxy_tmny (“2007 ICI Testimony”); 2009 ICI Comment Letter.

10 See 2007 ICI Testimony.

11 See, e.g., Section 112 of Delaware General Corporation Law (permitting a Delaware corporation to adopt a bylaw provision that specifies the circumstances under which shareholders would have access to the corporation’s proxy materials to nominate directors).

12 As we recommended above, however, the SEC should be required to take into account relevant differences between operating companies and investment companies in exercising this authority.

13 See, e.g., U.S. Securities and Exchange Commission Chairman Mary Schapiro, Speech by SEC Chairman: Address to the Practising Law Institute’s 41st Annual Institute on Securities Regulation (November 4, 2009) (stating that the SEC has received more than 500 comment letters and expressing Chairman Schapiro’s belief that the final product resulting from the rulemaking process will be better as a result of the comment process), available on the SEC’s website at http://www.sec.gov/news/speech/2009/spch110409mls.htm.

14 ICI has consistently emphasized the critical importance of applying strict eligibility criteria under any proxy access regime in an effort to reasonably ensure that the interests of shareholders who propose bylaw amendments relating to director nominations and of shareholders who nominate company directors (in each case, on the company’s proxy statement) are aligned with the interests of other long-term shareholders. In the 2009 ICI Comment Letter, ICI recommended that if the SEC determined to go forward with a requirement to permit shareholders to nominate directors on a company’s proxy statement, such nominating shareholders should be subject to: (i) a significant ownership threshold of at least ten percent of a company’s securities; and (ii) a holding period that provides assurance that the shareholders are committed to the long-term mission of the company, such as two years. In suggesting a ten percent threshold, ICI noted that a higher threshold would encourage shareholders to come together to effect change, better assuring that the company’s proxy machinery would be used to advance the common interests of many shareholders in addressing legitimate concerns about the management and operation of the company. While we recommend that Congress refrain altogether from establishing specific eligibility criteria for proxy access by statute, we would especially oppose adoption of the one percent ownership threshold in H.R. 2861. We believe such a low threshold is inadequate to protect long-term shareholders against potentially detrimental actions by shareholders that do not hold a significant stake in the company.

15 The 2009 ICI Comment Letter recommended, in the event that the SEC pursued its shareholder access proposal, permitting no more than one shareholder nominee. We pointed out that given the novelty of permitting shareholders to have their director nominees included in a company’s proxy statement, it is appropriate to limit the number of nominees to one. This approach also would diminish the chances that a well-functioning, dedicated board will be disrupted by shareholder-nominated directors pursuing narrow interests not shared by other shareholders.

16 The NYSE filed a proposal with the Commission in October 2006 that would have eliminated broker discretionary voting with respect to directors of all issuers, including registered investment companies. In response to information submitted by ICI and others concerning the difficulties funds would face if broker discretionary voting were eliminated for fund director elections, however, the NYSE filed an amended proposal with the Commission in 2007. The amended proposal prohibited discretionary broker voting for the election of directors for all issuers except registered investment companies. In 2009, the SEC approved that NYSE proposal. See Securities Exchange Act Release No. 60215 (July 1, 2009), available at http://www.sec.gov/rules/sro/nyse/2009/34-60215.pdf.

17 Id. at p. 8.

18 Investment Company Institute, Costs of Eliminating Discretionary Broker Voting on Uncontested Elections of Investment Company Directors (December 18, 2006), available at http://www.ici.org/pdf/wht_broker_voting.pdf. ICI report reflected data as of year-end 2005, but more current data remain consistent, according to additional ICI research performed in 2009.

19 See Rule 30b1-4 under the Investment Company Act.

20 See Investment Company Institute, Proxy Voting by Registered Investment Companies: Promoting the Interests of Fund Shareholders, July 2008, available at http://www.ici.org/pdf/per14-01.pdf.

21 See, e.g., 2007 ICI Testimony, supra n.9; Investment Company Institute, Submission to U.S. Chamber of Commerce Commission on the Regulation of U.S. Capital Markets in the 21st Century, January 26, 2007, available at http://www.ici.org/policy/comments/07_reg_cap_mark_stmt; Letter from Paul Schott Stevens, Investment Company Institute, to Professor Hal S. Scott, Director, Committee on Capital Markets Regulation, Nov. 20, 2006, available at http://www.ici.org/pdf/20606.pdf.

22 See H.R. 2420, Mutual Fund Integrity and Fee Transparency Act of 2003, Committee on Financial Services markup (July 23, 2003). See also Siobhan Hughes, Rep. Frank Plans Hearing on Disclosure of Proxy Votes, Dow Jones News Service, March 22, 2007.

23 See GAO-04-749, Pension Plans: Additional Transparency and Other Actions Needed in Connection with Proxy Voting (August 2004), available at www.gao.gov/new.items/d04749.pdf.

24 See A Report by the Investors’ Working Group, An Independent Taskforce Sponsored by CFA Institute Centre for Financial Market Integrity and Council of Institutional Investors, July 2009, at p.6 (“Institutional investors—including pension funds, hedge funds and private equity firms—should make timely public disclosures about their proxy voting guidelines, proxy votes cast, and investment guidelines.”); available at http://www.cii.org/UserFiles/file/resource center/investment issues/Investors' Working Group Report (July 2009).pdf.

25 See “Facts about the AFL-CIO’s Proxy Votes,” available at  http://www.aflcio.org/corporatewatch/capital/upload/facts_aflcio_proxy_votes.pdf.

26 See supra, n.8.

27 See Overview of Fund Governance Practices, 1994-2008, at 6, available at http://www.idc.org/pdf/pub_09_fund_governance.pdf . Moreover, 98 percent of independent directors have never been employed by the fund complex. Id. at 13.

28 Id. at 11.

29 SEC Release No. IC-26520 (July 27, 2004), 69 Fed. Reg. 46378 (Aug. 2, 2004). The amendments also would have required virtually all funds to be composed of at least 75 percent independent directors.

30 Chamber of Commerce v. SEC, 412 F.3d 133 (D.C. Cir. 2005); Chamber of Commerce v. SEC, 443 F.3d 890 (D.C. Cir. 2006).

31 See SEC Release No. IC-27600 (December 15, 2006), 71 Fed. Reg. 76618 (December 21, 2006). One study (the “Literature Review”) provides a summary of recent academic research related to mutual fund governance. The other study (the “Power Study”) discusses the strength of the statistical tests used in many of the academic papers cited in the Literature Review.

32 See Investment Company Institute, A Review of the SEC Office of Economic Analysis Board Independence Studies, March 2, 2007, available at http://www.ici.org/pdf/ppr_07_oea_study.pdf. See also letter from Paul Schott Stevens, Investment Company Institute, to Nancy M. Morris, Secretary, Securities and Exchange Commission, March 2, 2007, available at http://www.ici.org/directors/07_sec_oea_studies_com.

33 See Proxy Disclosure Enhancements, SEC Rel. Nos. 33-9089; 34-61175; and IC-29092 (Dec. 16, 2009), available at http://www.sec.gov/rules/final/2009/33-9089.pdf.

34 Id. at 39-40.