When a benefit fund invests in equity securities (common stock of corporations) it acquires proxy voting rights on the leadership, policies and structures of the corporations that issue the securities. Proxy voting rights are considered "plan assets" by the Department of Labor. That means Trustees have the same fiduciary duties for proxies under ERISA that they have for other plans assets. ERISA allows Trustees to delegate their proxy voting rights to an investment advisor who is registered under the Investment Advisers Act of 1940. MCG has been a registered Investment Advisor since 1989. Numerous studies have shown that promoting good corporate governance through proxy voting and engaging companies can protect and enhance the economic value of their investments.
Since MCG does not render consulting services to the corporate community, it has no conflicts of interest. It reviews each proxy issue with final decisions based on the merits of each case and with the best interest of the plan's participants and beneficiaries in mind. MCG provides a detailed annual report to its clients explaining the issues and reasons MCG voted the proxies the way it did. In addition, MCG provides an annual executive summary that reviews major developments in the corporate governance arena, and MCG's voting patterns on the most common proxy issues. MCG’s independence and objectivity enabled it to react immediately to SEC disclosures on auditor conflicts of interest in 2001—it was the only proxy voting agent, for example, to oppose Arthur Andersen at Enron. It has also allowed MCG to scrutinize management advisory votes on pay more vigilantly from a shareholder perspective than other proxy voting agents.
Upon client request, MCG will assist clients in engaging the companies they own on matters of shareholder interest. An engagement can involve:
- Writing letters on a client’s behalf
- Attending informal meetings with a company
- Preparing and presenting shareholder proposals
- Representing a client at a company’s annual meeting of shareholders
An example was MCG’s active participation in the coalition of shareholders who helped restructure the CVS-Caremark merger, which was credited with adding $3.3 billion in value for Caremark shareholders. There is no additional charge to clients if they request MCG’s assistance on corporate engagements.
