On the Duty of Care of Institutional Investors: Evidence on Participation of Mutual Fund Managers in Shareholder Meetings in Israel

This paper analyzes Israeli mutual fund managers’ decisions regarding participation in shareholder meetings. The evidence suggests that the decision is affected by both the institution's and its beneficiaries’ interests. Consistent with the beneficiaries’ interest, the odds of attending are higher when the proposals to be voted upon could harm the fund's beneficiaries, than in other proposals, and the odds decrease with board independence. Consistent with the institution's interests, the odds that mutual funds managed by commercial banks will participate in shareholder meetings are found to be negatively related to the corporation's bank debt level. Surprisingly, despite their legal obligation, only 27% of the mutual fund managers expected to attend a meeting actually do so.