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This chapter investigates voting decisions by mutual funds in a variety of management-sponsored proposals in Israel. Our main findings are that mutual fund managers tend to vote with management and oppose only about 30 percent of all potentially harmful proposals. Larger equity holdings by the fund manager and better prior performance by the firm are found to be negatively associated with the odds of voting against management. Also, mutual funds managed by banks are found to exhibit better monitoring than mutual funds managed by private investment companies. We find that bank fund managers are more likely to vote against management than other mutual fund managers. We further find that non-bank funds tend to increase equity holding following the meeting regardless of their vote, whereas bank funds tend to follow the “Wall Street Rule” and reduce their equity holdings after voting against management.

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.