I tried posting about something else this week, but there’s a gravitational force, so here’s bonus Tesla content.

Honestly, this is what I find interesting and unexpected:

Schwab Asset Management earlier this week pledged to back the pay proposal after a number of prominent retail shareholders said on social media that they would move funds out of brokerages that voted in opposition.

With the caveat that I am not exactly clear on what assets were involved, this is an interesting conundrum of fiduciary obligation and mutual fund voting.

On the one hand, shouldn’t funds vote the way the investors want? On the other, Tesla stans are not the only investors in the fund, and if Schwab believes the pay package is bad for the fund overall, shouldn’t those other investors be protected?

To wit: when adopting its voting choice program, BlackRock explicitly said it wouldn’t just delegate voting decisions to investors; instead, it had a fiduciary obligation to review the range of choices to decide they were all suitable, which is its justification for giving investors only a limited slate of pass through voting options.

But also – and, again, I’m not sure I’m clear on what exactly happened here – if Schwab voted assets not based on the preferences of investors in the relevant funds, but based on the preferences of other clients, that seems to be clearly a violation of fiduciary duty. The SEC once settled an enforcement action against an adviser for voting all funds in accord with union preferences in order to win union business. Schwab can’t use its other business interests to dictate how it votes specific funds.

That’s all I’ve got.