Though he did not get much credit for it, one of Harvey Pitt's last acts as SEC chairman was to hand a tremendous victory over the mutual-fund industry to the AFL-CIO. The SEC commissioners decreed that mutual funds must henceforth disclose how they cast their proxy votes on such corporate-governance issues as executive pay and dodging taxes by reincorporating in Bermuda. The end of secrecy will put managers of major mutual funds in the cross-hairs of investor controversy, because the funds have routinely voted their massive holdings with the corporate managements and against the interests of ordinary investors, including the workers whose savings and pensions are invested in the funds.

The decision was a man-bites-dog story that got scant notice, but shareholder activists celebrated because it represents another critical step toward reining in unaccountable corporations and out-of-control CEOs--the concentrated insider power that produced Enron and the many other scandals. Mutual funds collectively own around 23 percent of all publicly traded companies, so how they vote their shareholdings is often decisive. Their cozy alliances with CEOs are one reason labor, environmentalists and religious groups seldom prevail in shareholder challenges aimed at cleaning up a company's behavior.

The CEO can count on the big funds' support in these fights because the CEO gives them a ton of business managing corporate-controlled investments. You don't vote with the CEO, you lose his business. In a financial system always boasting about its transparency, this profound conflict of interest has been protected by secrecy--a contradiction that even Pitt couldn't abide in the present climate of skepticism toward Wall Street. It perhaps also helped that Pitt received some 7,000 supporting comments from investors, thanks to efforts by the AFL's unions and other shareholder activists.

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