Funds Cave to Google's Blind Eye at Censorship

Few supported a proposal to fight the Chinese government's demands for censorship.
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Not too long ago your mutual fund managers were asked to take a stand, on your behalf, in defense of freedom.

They didn't have to pick up a gun and fight. Or hide dissidents in the attic. They didn't even have to reach into their wallets.

All they had to do was cast a vote at the

Google

(GOOG) - Get Report

annual general meeting urging the powerful company to stand up to censorship around the world.

Simple. Easy. Powerful.

So how did they do?

Mutual fund managers are required to account for their proxy votes every year in filings with the

Securities and Exchange Commission

. The proposal introduced by New York City Comptroller William Thompson Jr. to resist the Chinese government's demand for censorship was voted down in May, but the voting reports have only just come out. They show who stood up and who sat down.

If you'd like to think that America stood for freedom at home and abroad, they make depressing reading.

American funds'

(AGTHX) - Get Report

Growth Fund of America (AGTHX) has the kind of name designed to make your heart stir on the Fourth of July. But don't ask the fund managers to fly the flag for freedom at Google. They didn't. They sided with Google's management and the tyrants in Beijing, and voted against Thompson.

American Funds declined to comment.

The folks at index giant Vanguard manage more of America's investments than any other company. They're based in Valley Forge, Penn., an historic site from the War of Independence. The Liberty Bell is just down the road in Philly.

Vanguard's vote on freedom at Google, through the

(FTSMX)

Total Stock Market Fund (VTSMX)? Against.

The list goes on. T. Rowe Price's

(PRGFX) - Get Report

Growth Stock Fund ( PRGFX), Putnam's

(PINVX)

Investors Fund (PINVX), Blackrock's

(PRGFX) - Get Report

Global Growth (MDGGX), Barclays'

Index 500 iShare

(IVV) - Get Report

and State Street's

SPDR

(SPY) - Get Report

. Even Bill Miller at

(LMVTX) - Get Report

Legg Mason Value Trust (LMVTX).

They all voted against Thompson.

Most of the fund companies declined to comment or could not be reached. Fund companies usually hide behind the "policy" of not commenting on proxy votes. One exception:

T. Rowe Price

(TROW) - Get Report

, which said it might reconsider motions like Thompson's down the road.

Why does this matter?

Remember, a few years ago, Google caved in to pressure from the Chinese government and agreed to censor its search engine there, suppressing news of local dissidents and oppression. Google bosses Sergey Brin, Larry Page and Eric Schmidt insisted that cutting this deal with Beijing was the price of doing business in China. And they argued they could do more good from the inside than from outside.

Maybe.

But Thompson's motion wouldn't have stopped Google from operating in China. It wouldn't even have stopped Google from cutting this deal.

It would only have prevented the company from giving in without a fight.

And would have forced China to play its dirty hand in public.

Under Thompson's motion, Google management would have been required to take all legal steps possible to fight any demand for censorship. The company would never have been required to break the law anywhere. But if a government wanted Google to start doctoring search engine results to suppress politically inconvenient truths, that government, any government, would have had to take the company to court to impose its will.

Not much to ask, really. But it was too much for Brin, Page and Schmidt. And it was too much for your fund manager.

Thompson's motion didn't even involve any risk to Google's business, as it was largely symbolic. Brin and Page still have most of the votes and they opposed the measure.

But support from the outside shareholders could still have been a vote heard round the world.

No wonder we are losing our freedoms. If we literally won't lift a finger to protect or advance them, what do we expect?

Imagine if Thompson had submitted a motion demanding a company take all legal means to fight, say, racism. It would have been waved through. Management would have apologized for not introducing its own motion first. Al Sharpton and Jesse Jackson would have been an all-media phenomenon. Combating racial discrimination has become, rightly, a national value.

Freedom of speech? Meh.

These fund managers are taking a gamble that American investors don't care either. And they are probably right. How many of these managers will get any pressure from their own investors? How many people will move their cash to another mutual fund in anger?

Don't wait up.

But let's ring the bell for the handful who did the right thing at Google.

Like Will Danoff, Harry Lange and other managers at Boston-based

Fidelity Investments

. Danoff, at

(FCNTX) - Get Report

Contrafund (FCNTX), and Lange, at

(FMAGX) - Get Report

Magellan (FMAGX), are among the biggest outside investors in Google.

They didn't vote with Thompson, but at least they refused to support Google's management either. They abstained. Among the others who did the same were managers at Oppenheimer and Janus Funds.

In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining TheStreet.com in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.