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The Power of Proxy Voting

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ESG (environmental, social and governance) investors can enhance the value of the companies in their portfolios over the long term by ensuring that their proxies are voted in accordance with their interests as shareholders.

Protecting Shareholder Value

Annual meetings provide a window into the internal workings of a company. At these meetings, votes are held on company policies and governance decisions, including the election of directors and ratifying executive compensation. While voting may seem relatively unimportant, it has the power to influence corporate behavior, such as progress on environmental goals or on the remediation of controversies facing the company. Knowing what resolutions are being raised by other shareholders at these meetings may also help investors pinpoint emerging issues—either ESG or fundamental—before they become major problems.

Today, some companies are making proactive changes to avoid votes on issues they know are supported by shareholders. For example, in response to a growing trend of resolutions on board diversity, IBM and CVS Health have announced their intentions to consider racial and gender diversity in future board appointments. And while a resolution to add a climate expert to the board was opposed by ExxonMobil and failed to pass in 2016, the company has now reversed course. In January, Exxon appointed a very well-regarded scientist with a strong background in climate change to their board.

Understanding How Your Investment Managers Vote

Because proxy voting and shareholder resolutions can make an impact on company leadership and illuminate potential risks, it pays to investigate the proxy voting policies of the investment managers that handle your investments. Many managers hold a default position of voting with management rather than closely evaluating each item that comes up for a vote. But some managers base their votes on policies that reflect their ESG values, which can help make the voices of their like-minded investors heard.

Investment managers who take the time to vote shareholder proxies according to their ESG views are also more likely to directly engage company management in dialog, thereby developing a deeper understanding of the qualities of the key leaders of those companies. For these reasons, learning about an investment firm’s proxy policies and voting record are a key part of understanding how they can protect and grow shareholder value over the long term.



As of 09/30/2017, percentage of the Parnassus Fund represented by the companies in this article are as follows: IBM Corp. is 3.2%, CVS Health Corp. is 0.8% of TNA. Percentage of the Parnassus Core Equity Fund represented by the companies in this article are as follows: CVS Health Corp. is 3.5% of TNA. Percentage of the Parnassus Endeavor Fund represented by the companies in this article are as follows: IBM Corp. is 4.3% of TNA. Percentage of the Parnassus Asia Fund represented by the companies in this article are as follows: IBM Corp. is 2.3% of TNA. Percentage of the Parnassus Fixed Income Fund represented by the companies in this article are as follows: CVS Health Corp. due 8/12/24 is 0.9% and CVS Health Corp. due 7/20/20 is 0.9% of TNA.

Mutual fund investing involves risk, and loss of principal is possible.

The views expressed are subject to change at any time in response to changing circumstances in the markets and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or the Parnassus Funds. Current and future portfolio holdings are subject to risks.