Fidelity and other fund companies say they work more effectively in private, meeting face to face with company directors and executives to negotiate changes. "We've always believed in quiet diplomacy," says Loporchio. For example, Tektronix, a Beaverton, Ore., oscilloscope manufacturer, recently revamped its stock incentive plan at Fidelity's request.

But the proof isn't in the pudding, respond critics. "If mutual funds were doing things behind the scenes, we wouldn't be in the mess we're in now," says Nell Minow, cofounder of the Corporate Library, a shareholder watchdog group. Mutual funds hold about 21 percent of all U.S. stocks. That's a lot of muscle to rally behind calls for, say, independent audit committees and reasonable executive pay.

A big part of the problem is that no one really knows how funds like Fidelity and Vanguard are voting all the shares they hold. The Securities and Exchange Commission, which regulates mutual funds, does not require firms to disclose how they vote--not even to individual shareholders--so they don't. Janus Capital Management, the seventh-largest fund group, refused to tell U.S. News whether it gave a thumbs up or a thumbs down to a controversial former Enron director who was re-elected to the board of Lockheed Martin earlier this year.

Tight-lipped. "Their general attitude is that it's none of fund holders' business how they vote," says Mercer Bullard, former assistant chief counsel at the SEC and founder of Fund Democracy, a mutual fund investor advocacy group in Oxford, Miss. The Shareholder Action Network, a Washington, D.C., group also working for greater corporate accountability, says it knows of only eight U.S. fund companies (out of more than 8,000) that publicly disclose their proxy votes. A list of those funds and details on how shareholder proposals work can be found at www.shareholderaction.org.

Responding to the wave of corporate scandals and investor outrage, the SEC last month changed its tune and proposed new rules that would require fund companies to make public their voting records and proxy voting policies. "Disclosure is the only effective way for shareholders of mutual funds to know that the funds are actually voting in shareholders' best interests," says Jamie Heard, head of Institutional Shareholder Services, a Rockville, Md., proxy advisory service.

Traditionally, the fund industry has stubbornly resisted disclosure. "If votes were public, it would be an invitation to politicize the issues to special interest groups with no interest in helping shareholders," says Chris Wloszczyna, a spokesman for the Investment Company Institute, which represents the mutual fund industry. Confidential voting is a better solution, he says. "If the vote is secret, the company doesn't know how the fund has voted," Wloszczyna says. Thus management can't reward or penalize a fund for its votes by awarding or withdrawing business. Currently, few companies use secret ballots in proxy votes.

That misses the point, says Russ Kinnel, director of fund analysis at Morningstar. "Fund investors are entitled to a level of awareness as to how their shares are being voted." Thanks to the recent shenanigans of the likes of Enron, WorldCom, and Tyco, fund shareholders may get their wish.

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