Published by The Guardian.

Marc Gunther
theguardian.com, Tuesday 20 August 2013 14.00 EDT

Despite a proxy vote, ING mutual fund hasn’t sold its holdings in companies involved in Sudan, writes Marc Gunther

Investors of an ING-managed mutual fund have asked the firm to withdraw its holdings in companies that do significant business in Sudan Photograph: Khaled Desouki/AFP/Getty Images

Call me old school but, in my view, companies should be accountable to their owners.

They should also try to stay away from repressive governments like the one in Sudan, where millions of people have been killed in a long-running genocide.

So when, as part of a campaign to stop the flow of money to Sudan, investors voted to ask a mutual fund managed by ING US to sell its holdings in companies that “contribute to genocide or crimes against humanity,” you’d think that ING US would comply.

It has not.

This is surprising for a number of reasons. First, the financial services industry, which is not exactly held in high regard by most Americans these days, ought to be striving to be more ethical and responsible, not less.

Second, ING US, which was spun off from the Dutch financial services firm ING Group last spring, is about to rebrand itself as Voya Financial, and therefore should be acutely sensitive about its image right now. Finally, the ING mutual fund in question appears to have only small holdings in the Asian oil companies targeted by the anti-genocide campaign. Divesting should be a no-brainer.

So what gives?

“That’s a good question,” says Eric Cohen, the executive director of Investors Against Genocide, a nonprofit advocacy group that’s leading the divestment campaign. “ING is a relatively small holder of PetroChina and Sinopec. It should be easy for them, if they want, to get on the right side of this issue.”

The background

Investors Against Genocide filed the shareholder resolution with ING as part of its long-running campaign to get investment firms to avoid or divest their shares of four Asian oil companies that do significant business in Sudan. The four companies are China-based PetroChina, China National Petroleum Corp., China Petroleum & Chemical Corp./Sinopec, India-based Oil and Natural Gas Corp. and Malaysia-based Petronas. These oil companies provide revenues to the government responsible for the genocide, human rights activists claim. In 2009, the International Criminal Court issued a warrant for Sudan’s president, Omar al-Bashir, on charges of crimes against humanity and war crimes in Darfur.

Presidents Clinton, Bush and Obama all have imposed sanctions against Sudan. The East African nation is accused of providing “support for international terrorism, ongoing efforts to destablise neighbouring governments…human rights violations including slavery and the denial of religious freedom,” according to the U.S. Treasury Dept.’s Office of Foreign Assets Control. US oil companies – and most other US companies – are barred from doing business in Sudan.

But US investors are permitted to own shares of foreign companies that operate in Sudan, such as the aforementioned Asian oil companies. And ING US and most, albeit not all, other big mutual fund companies have chosen to include shares of such companies in their funds.

Investors Against Genocide is campaigning against Fidelity Investments, Franklin Templeton Investments, JPMorgan Chase and Vanguard, all of which manage funds that own the Asian oil firm shares. By contrast, T. Rowe Price, TIAA-CREF and American Funds have sold their holdings in the Asian oil companies, as have many university and foundation endowments.

At ING US, the Investors Against Genocide campaign came to a head in June 2012. Shareholders of ING’s Emerging Countries Fund approved a resolution by 59.8% to 10.7%, with 29.5% abstaining, that asked the fund to come up with “procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity.” At the same time, Emerging Countries Fund merged into ING’s Emerging Markets Equity fund, which means that, technically, the Emerging Countries fund no longer exists. According to ING’s most recent filings, the Emerging Markets Equity Fund holds about $6mn worth of shares in PetroChina, Oil & Natural Gas Corp. and China Petroleum & Chemical Corporation.

True ‘shareholder democracy’ isn’t here yet

I requested an interview with Huey Falgout Jr., senior vice president and chief counsel of ING US, and instead was provided with a written statement which says, in full:

“ING Investments, LLC, which was the adviser to the now-dissolved ING Emerging Countries Fund, is in full compliance with all laws and regulations applicable to it, including those that address serious human rights concerns, as they relate to the holdings in our family of funds. The ING Emerging Countries Fund was dissolved last year, therefore, the proxy vote in question is no longer applicable.

“ING Investments, LLC is fully committed to conducting its business with the highest levels of integrity and regulatory compliance, which includes strict compliance with all applicable laws, regulations, and standards.”

Translation: ING US obeys the law, blah, blah, blah.

If nothing else, this story is a reminder of how far US companies still have to go in order to practice what’s euphemistically called “shareholder democracy.”

“It’s not uncommon for companies to ignore shareholder votes,” says Stephen Davis, a senior fellow at Harvard Law School and an expert on corporate governance. “There’s a real fragility to the system of investor accountability.” That’s putting it mildly. When it comes to resolutions on social and environmental issues, the election of directors, CEO pay or combining the jobs of CEO and board chairman, shareholder voices and interests are frequently brushed aside.

On 7 August, a coalition of institutional investors, including those who manage money for the Presbyterian Church, the Unitarian Universalist Association and Catholic groups including the Sisters of Mercy, the Maryknoll Fathers and Brothers and the Dominican Sisters of Hope, wrote to ING to ask the company to reconsider its thinking and go “genocide-free.”

It doesn’t seem like much to ask.