In the paper, Do Pension-Related Business Ties Influence Mutual Fund Proxy Voting? Evidence from Shareholder Proposals on Executive Compensation, which can be found in a forthcoming issue of the Journal of Financial and Quantitative Analysis, we examine the relation between mutual fund votes on shareholder executive compensation proposals and pension-related business ties between fund families and the firms. Mutual funds have a fiduciary responsibility to act in the interests of their shareholders. Shareholder proposals provide one mechanism via which mutual funds can influence firm policies to benefit shareholders. However, mutual funds benefit when they receive pension fund business from firms, which creates a potential conflict of interest that creates an incentive for fund managers to support firm management and to vote against shareholder proposals. Rationally, fund families should trade off the economic benefit of self-interested voting against possible economic losses related to lower portfolio returns, damaged reputations, or potential lawsuits. Shareholder proposals that relate to executive compensation provide an excellent arena in which to examine the influence of pension-related business ties, since these proposals can directly affect the pay and benefits of managers with influence over which fund families receive pension business.

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