Fidelity Investment Research Paper
Fidelity Investments has come a long way compared to the small mutual fund company they started off as 70 years ago. Each year strategies are carefully assessed to ensure that the needs of the marketplace as well as their shareholders are met. Due to the market constantly changing, it is important that new ideas and innovations are used in order to keep up with the industry. The social risks and challenges Fidelity faces are on a larger scale when thinking long term. These challenges include increased government regulation, fierce competition, stagnant investment flows, and a rise in low-fee investment funds that will eventually cut into profits (reuters.com). All of these pose risks that will take a decade of hard work and creativity especially for such a fast-growing company. Environmental risks have remained low due to the policies and procedures that have been taken in the most recent years. Shareholders are the ultimate owners of Fidelity. The board of director’s main purpose is to maximize the long-term success of the company on behalf of the shareholders. They believe in high standards of corporate responsibility, which makes good business sense and will lead to higher growth. Fidelity takes environmental, social and government issues into account when there is material impact on risk or return.The CEO of Fidelity, William P. Foley II owns about 2.68% of all Fidelity stock, which totals to $174 million (forbes.com). In addition, he gets a base salary of just under a million. This shows that William P. Foley II is paid mainly through the capital gains of his stock options. This is very good in terms of short-term growth for the company because his salary depends on it. It would be a possible long-term concern, however he has been CEO of Fidelity for 22 years. This shows loyalty to his company, which means his moral hazard towards long-term growth is decreased.
Fidelity’s voting policy shows there is responsiveness to shareholder voting “FIL will vote all equity securities where there is a regulatory obligation for us to do so or where the expected benefit of voting outweighs the expected costs.” (fidelity.com) However, during recent implementation of new SEC regulation in July 2014 about money market mutual funds, Fidelity decided to merge their six mutual funds into three mutual funds. During this, they did not require shareholder approval claiming it was in the best interest of their shareholders. It seems that not many big policy changes require a shareholder vote.            For lawsuits and fraudulent practices, it seems that Fidelity has been involved in a few lawsuits in recent years. One class action lawsuit was settled because employees and ex-employees complained Fidelity only offered Fidelity mutual funds. Another class action lawsuit occurred when employees complained about paying excess fees for their 401Ks. The Supreme Court is involved with this case to see if “fiduciary breach claims accusing Edison of selecting the more expensive retail share class mutual funds instead of the less costly options.” (stockbrokerfraudblog.com) Therefore, Fidelity is not particularly “innocent” when it comes to unsavory business practices, but they have put a lot of thought into stakeholders. They have a great sense of corporate responsibility.