Board Candidates Unlikely to get a Shearing from Fund Managers
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Tuesday, May 22, 2007

Board Candidates Unlikely to get a Shearing from Fund Managers

Mutual funds tend to be like sheep when voting for their corporate board directors: they follow one after the other. This assertion is part of a new study done by Michael Ostrovsky, assistant professor of economics at the Stanford Business School.

The door were opened for the study to take place in 2003 when the SEC mandated that all mutual funds disclose their proxy voting.

Ostrovsky found that some funds are more "management friendly;" in other words, they approve anybody corporate management puts in front of them.

One of the most interesting findings of the study has to do with fund managers or proxy voting committees that do not like a candidate. They would not vote "no" unless they knew that other funds were going to do the same.

So why do fund managers and proxy oversight committees tend to band together when opposing a candidate? Ostrovsky says that it has to do with the how it will look to the management of a company if one were to disagree.

Being that the information is now public, that person is in a sense "showing that they are against them (management)," says Ostrovsky.

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