Meanwhile, socially conscious managers also have been vocal supporters of regulatory changes that would require more openness and transparency in company reporting on financial and other issues. This community, which includes the Social Investment Forum, applauded the Securities & Exchange Commission proposal in September to require mutual funds and other registered management investment companies to disclose their proxy-voting record and policies. The SEC is now collecting comments on the proposal.
"I think this is something we've been calling for for a long time and will make a significant impact on corporate governance and corporate accounting in general," Kanzer says.
In fact, many socially conscious funds, including Domini, already have been posting their proxy-voting records at their Web sites. "Many securities are being voted in the dark and are being voted for shareholders by fund managers," Kanzer notes. "This will allow individual investors to monitor funds based on voting performance and will identify conflicts of interest-what funds are voting for when they are vying for 401(k) business, for example."
Gorte says she also was encouraged by a recent proposal from SEC Chairman Harvey Pitt to eliminate an exemption that allows companies to challenge shareholder resolutions and keep them off their ballots. Many managers also have cheered the positive reforms in the Sarbanes-Oxley Act of 2002, signed into law by President Bush in July. The law enacted provisions to deter and punish corporate and accounting fraud.
However, the social investing community doesn't think the law goes far enough in implementing safeguards to protect investors. Many managers and investors want actions taken that will enhance board independence and diversity, abolish staggered terms for directors, require expensing of stock options and increase disclosure on social and environmental issues.
"There's much to commend in the reforms, but the reform train can't stop now," says Smith of the Social Investment Forum.