HOLMES REPORT: New rule for mutual funds, push for registry of clinical trials give boost to transparency

The past couple of weeks have been good for the cause of transparency - one of the forces that drives the importance of PR.

The past couple of weeks have been good for the cause of transparency - one of the forces that drives the importance of PR.

First, a new Securities & Exchange Commission rule forced mutual-fund companies to disclose their proxy votes to investors. It might strike you as extraordinary that these companies had previously resisted pressure to tell the owners of all those shares how they were voted in corporate-control situations (this year's vote on Michael Eisner's future, for example), but they had.

In fact, when the AFL-CIO called for disclosure, the industry argued that letting people know how their shares were voted could negatively impact the stock price of the companies in which they invested and could harm the "diplomacy" funds practiced with corporate management. Furthermore, most funds viewed their votes as "proprietary information." And, naturally, the costs of disclosure would be too burdensome.

Said the CEOs of Fidelity and Vanguard in a Wall Street Journal op-ed, "The proposal's unintended consequences could undermine the best interests of 95 million mutual-fund shareholders." Disclosure, they claimed, "could open mutual-fund voting to thinly veiled intimidation from activist groups whose agendas have nothing to do with maximizing our clients' returns."

At least now shareholders will be able to see whether Fidelity, Vanguard, and others are resisting such intimidation or knuckling under, and whether those same funds are looking out for their clients' returns or, as some cynics suspect, simply going along with the existing management at most companies, regardless of performance.

The second piece of good news is that pressure is mounting for a registry of clinical-trial results. A dozen leading medical journals announced that any trials that begin enrollment after July 1 of next year must register in a public-trials registry in order for the results to be published in those journals. There are concerns that companies tend to publish only positive results, while withholding negative findings - something that would become more difficult with the new registry in place.

Those concerns were exacerbated last week when a congressional inquiry learned that some drug companies that wanted to warn consumers about possible health problems (uncovered during trials) were prevented from doing so by the Food & Drug Administration. Rather than protecting the public from potentially harmful drugs, the FDA decided it would protect us from potentially harmful knowledge that we are presumably too stupid to handle appropriately.

Many pharma companies say they will continue to oppose the registry - they say it would require them to reveal proprietary information to competitors - but transparency is an irresistible force. It's coming, whether companies like it or not. The smart ones will embrace it; the rest will see their worst fears realized.

  • Paul Holmes has spent the past 17 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of www.holmesreport.com.

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